Weekly Market Outlook (31-04 April)

UPCOMING
EVENTS:

• Monday: German CPI.
• Tuesday: Japan Unemployment Rate, Japan Tankan Index,
  China Caixin Manufacturing PMI, RBA Policy Decision, Swiss Manufacturing
  PMI, Eurozone CPI, Canada Manufacturing PMI, US ISM Manufacturing PMI, US
  Job Openings.
• Wednesday: US ADP, US Tariffs implementation
• Thursday: China Caixin Services PMI, ECB Meeting Minutes,
  Swiss CPI, Eurozone PPI, US Challenger Job Cuts, US Jobless Claims, Canada
  Services PMI, US ISM Services PMI.
• Friday: Swiss Unemployment Rate, Canada Employment
  Report, US NFP, Fed Chair Powell speech.

Tuesday

The RBA is
expected to keep the Cash Rate unchanged at 4.10%. As a reminder, the central
bank cut interest rates by 25 bps at the last meeting but delivered a more
hawkish than expected guidance. Since then, the monthly CPI data showed further improvement and the employment report disappointed. We’ve also got the Australian
government announcing unexpected tax cuts which could hinder RBA’s progress.

The Eurozone CPI
Y/Y is expected at 2.3% vs. 2.3% prior, while the Core CPI Y/Y is seen at 2.5%
vs. 2.6% prior. We’ve got soft French and Spanish inflation figures last Friday which saw the market increasing the bets
for another 25 bps rate cut at the April’s meeting to 90%+ probability with a
total of 70 bps of easing priced by year-end.

The US ISM
Manufacturing PMI is expected at 49.5 vs. 50.3 prior. The S&P Global survey
showed the Manufacturing sector falling back into contraction. The agency noted
that “business confidence in the outlook darkened, souring further from the
buoyant mood seen at the start of the year to one of the gloomiest readings
seen over the past three years, largely caused by growing worries over negative
impacts from recent policy initiatives from the new administration”. The most
widely cited were concerns about the impact of Federal spending cuts and
tariffs.

The US Job
Openings is expected at 7.632M vs. 7.740M prior. The last report showed an
increase in job openings with a decline in the layoffs rate and a steady hires
rate. It’s a labour market were it’s hard to find a job but there’s also low
risk of losing one. Nonetheless, that was January data so it didn’t incorporate
the recent developments in the Trump’s policies.

Wednesday

The US ADP is
expected at 105K vs. 77K prior. The last report was softer than expected with
the agency noting that “policy uncertainty and a slowdown in consumer spending
might have led to layoffs or a slowdown in hiring”. Their data, combined with
other recent indicators, suggests a hiring hesitancy among employers as they
assess the economic climate ahead.

On Wednesday the
US will unveil the reciprocal tariffs plan. There’s been lots of noise around
this event with discordant reports. Nobody defined the
general expectations though. Adam did the work though and came up with a
comprehensive analysis here.
The consensus seems to be 9-10% reciprocal tariff rate and 50% on China. This
is going to be the main event of the week and we will likely see huge moves
following the release.

Thursday

The Switzerland
CPI Y/Y is expected at 0.5% vs. 0.3% prior, while the M/M figure is seen at
0.0% vs. 0.6% prior. As a reminder, the SNB cut interest rates by 25 bps at the last meeting revising inflation
expectations downward for this year but bumping up those for 2026. The market
thinks the central bank is done with its easing cycle with just 7 bps of easing
priced in by year-end.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing
Claims continue to hover around cycle highs.

This week Initial
Claims are expected at 225K vs. 224K prior, while Continuing Claims are seen at
1862K vs. 1856K prior.

The US ISM
Services PMI is expected at 53.0 vs. 53.5 prior. The S&P Global survey saw
the Services sector rebounding strongly in March to 54.3 vs. 50.8 prior. The
agency noted though that “some of the March upturn was reportedly due to
business picking up after adverse weather conditions had dampened activity
across many states in January and February, which could prove a temporary
bounce.” The focus will likely be on the employment and price components.

Friday

The Canadian
Employment report is expected to show 12K jobs added in March vs. 1.1K in
February and the Unemployment Rate to tick higher to 6.7% vs. 6.6% prior.
Overall, I don’t think the data will matter much this week as everything will
hinge on the US tariffs announcement. In fact, I can see a bad report getting
faded if the tariffs news will be positive and vice versa in case the tariffs
release disappoints.

The US NFP is
expected to show 140K jobs added in March vs. 151K in February and the
Unemployment Rate to remain unchanged at 4.1%. The Average Hourly Earnings Y/Y
is expected at 3.9% vs. 4.0% prior, while the M/M measure is seen at 0.3% vs.
0.3% prior. The Average Weekly Hours are seen at 34.2 vs. 34.1 prior.

The Fed is seeing
the labour market remaining solid and not being a source of inflationary
pressures. That seems to still be the case with jobless claims not showing any
worrying signs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.