FX Majors Weekly Outlook (17-21 April) | Forexlive

UPCOMING
EVENTS:

Tuesday: UK
Jobs Report, Canada CPI.

Wednesday: UK
CPI.

Thursday: US
Jobless Claims.

Friday: S&P
Global US PMIs.

Tuesday: The UK
unemployment rate is expected to remain unchanged at 3.7% vs. 3.7% prior. Employment
is seen rising by 52K vs. 65K prior while Average Earnings are expected to cool
to 6.2% vs. 6.5% prior. The tightness of the labour market is what keeps the
central banks on the hawkish side of their policies due to the fear of
persistent higher inflation.

The Canadian
CPI Y/Y is expected at 4.3% vs. 5.2% prior and M/M at 0.5% vs. 0.4% prior. The
Core Y/Y reading is expected at 4.8% vs. 4.7% prior. The Bank of Canada remains
on pause to see how the cumulative interest rates hikes shape the economy.
Unless they get big surprises to their forecasts, they are likely to remain on
hold for longer barring a quick deterioration in the labour market.

Wednesday: The UK CPI
Y/Y is expected at 9.8% vs. 10.4% prior and the M/M at 0.5% vs. 1.1% prior. The
Core Y/Y is seen at 6.0% vs. 6.2% prior and the Core M/M at 0.6% vs. 1.2%
prior. These are all very high rates still. The central bank may need a fast
deterioration in the labour market or a US recession dragging the UK economy
down with it if they want the inflation rate to return to their 2% target. I
think that staying this high for too long can make inflation entrenched,
deanchor expectations and require a worse recession afterwards.

Thursday: As it’s
been the case for the past weeks, I think Jobless Claims should be a major
focus of the market after the mini banking “crisis” of mid-March. We may have
already seen early signals of the impacts from those events with big misses in
ISM PMIs, bad signs in the NFIB report and Jobless Claims trending higher. The
April NFP might have been the last good one. Initial Claims are expected at
240K vs. 239K prior, and Continuing Claims are seen at 1823K vs. 1810K prior.
Again, I expect a notable miss to weigh on risk sentiment, while beats may be
good for risk assets in light of better recent inflation numbers.

Friday: The
S&P Global US PMIs last month surprised to the upside signalling that the
banking “crisis” may have not impacted the economy that much. As a reaction, we
saw some risk on sentiment with the yen being sold off, equities rallying and
yields rising. That was voided at the beginning of April when the ISM PMIs,
which are regarded as more reliable indicators by the market, missed big
expectations causing the reverse reaction in the markets. Maybe those S&P
Global PMIs didn’t fully capture the impacts on the economy of the banking
“crisis”. But these ones should. The Manufacturing PMI is expected at 49.0 vs.
49.2 prior, and the Services PMI is seen at 51.5 vs. 52.6 prior. Misses,
especially if big ones, should weigh on risk sentiment with the JPY being
favoured as Treasury yields are likely to fall. Beats should have the reverse
reaction.

This article
was written by Giuseppe Dellamotta.