Last week it was a short one as the UK and Europe celebrated Easter weekend. Much of the focus was on the US labour data which was released on Friday. Following the positive data trend seen from the US Labour Department, non-farm payrolls soared by 916,000 jobs last month, marking up its largest gain since late August, while February data was revised to be higher. Unemployment declined to a 12-month low from 6.2% to 6.0% in line with market expectations. Following this on Monday, the Institute of Supply Management (ISM) services sector index strengthened sharply to a record high of 63.7 for March.

Bank of England Monetary Policy Committee (MPC) member Vlieghe advised that rapid growth is required to close the gap compared with the pre-pandemic growth roadmap. He noted that a few quarters of good growth would not imply that the central bank can put on the brakes and tighten policy. He also added that any increase in inflation would not be enough this year to say that the economy does not require monetary support.

In Europe, overall confidence in the region remained weak. This was illustrated by reports that Italy was set to cut its GDP forecast for 2021 growth from 6.0%. to 4.1%. This was further compounded when French President Emmanuel Macron announced a nationwide four-week lockdown, an alarming sign that Europe is yet again losing control of the pandemic.

Looking to the week ahead, the market will continue to focus on US data following the bullish labour data last week. The €1.9 trillion fiscal stimuli and a doubling of the vaccine target to 200 million doses in President Biden’s first 100 days in office is set to supercharge US economic growth this year. The FOMC meeting minutes and Fed Powell’s speech at the IMF will take the spotlight to articulate whether the FOMC will diverge from its current roadmap.

Tuesday

  • EU Unemployment rate
  • US JOLTS data

Labour data continues to take the focus with both the Eurozone unemployment rate and US job openings data. The big focus however will be on the US job openings following the strong payroll data last week which posted a year high. Job openings are expected to remain elevated which could continue to fulfil job creation and drive the economy forward.

Wednesday

  • UK/EU PMI Services
  • IMF Meeting
  • FOMC Meeting Minutes

The big focus on Wednesday will be the FOMC minutes. Federal policymakers may face pressure to signal the start of the tapering of asset purchases amid accelerating economic growth and inflation. It may start to find it difficult to explain the rationale for keeping policy accommodative if data continues to remain positive. In addition, the UK and EZ PMI final service data is set for release with no major changes expected. The IMF virtual three-day meeting also starts.

Thursday

  • UK PMI Construction
  • US Weekly jobless claims
  • Fed Chair Powell Speaks

The highlight of the day may be Fed Chair Powell’s speech (dependent on what is released in the previous day’s meeting minutes). Fed Chair Powell is due to participate in a panel discussion about the global economy at a virtual International Monetary Fund Seminar. The focus will be on monetary policy and clues for future action. In the meantime, before to his speech, the market will focus on the UK’s PMI construction data for signs of a pickup in economic activity. The US weekly jobless claims will also provide the market with an opportunity to review the labour picture once again.

Friday

  • UK house price index
  • US Producer Price Index

It will be a slightly quieter day with the UK house price index due for release with prices expected to remain tepid. In the meantime, the US producer price index (also known as factory gate inflation) is due for release. As factory-gate inflation can be reviewed for the future direction of inflation, the market will continue to review.

 

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