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Inflation in the euro zone has fallen steadily over the past 17 months, and investors will be watching closely to see if price pressures continue to ease in April, when data is released on Tuesday.
A Reuters survey of economists forecasts that the region's headline inflation rate will remain flat at 2.4% this month. An overshoot could mean that the European Central Bank could expect a Traders' confidence in starting a rate cut could be tested.
Latest business and consumer surveys show the eurozone economy is tentatively emerging from recent stagnation, with data on Tuesday showing the region's gross domestic product (GDP) has fallen in the three months to March. The market is expected to expand by 0.2% on a quarterly basis.
However, despite improving economic activity, most economists believe that Easter in March rather than April has led to lower prices for airline tickets and travel packages, and services inflation has fallen for the first time in six months. We expect it to decline.
ECB policymakers said they expected the coming months to be “bumpy” until inflation is expected to fall to its 2% target in mid-2025. This is especially true as rising oil prices and rapid wage increases are putting pressure on service prices.
Mark Wall, an economist at Deutsche Bank, predicted that services inflation and other domestic inflation measures would be up at least 0.2 percentage points in April and May, “which could upset expectations.” [ECB’s planned June rate cut] Unless there is a clear source of inflation distortion. ” martin arnold
Are there any signs that the U.S. job market is cooling?
Analysts and investors will be watching the next jobs report for signs of further heat in the world's largest economy after a series of stronger-than-expected U.S. inflation reports.
Nonfarm payrolls released by the Bureau of Labor Statistics on Friday are expected to show U.S. employers added 250,000 new jobs in April, according to a Bloomberg consensus forecast. The number is below the 303,000 roles added in March.
The unemployment rate is expected to remain flat at 3.8%, and month-on-month average income growth is expected to remain at 0.3%, the same as March's figure.
Labor market data remains a focus for market participants looking for clues about the future direction of monetary policy. Traders have sharply scaled back their expectations for rate cuts in 2024, from expectations in January of up to six quarter-point rate cuts to expectations that the Federal Reserve could expect one or two cuts by December. The expectation is that interest rates will remain lower.
In a new shock to markets, new data showed that U.S. economic growth slowed more than expected in the first quarter of 2024, according to the Fed's recommended inflation measure, but price pressures persisted. gave.
Ian Lingen, head of U.S. rates strategy at BMO Capital Markets, said the current consensus forecast for Friday's jobs report “doesn't suggest the Fed is in a hurry to cut rates.” In fact, the employment situation is likely to reinforce the view that Mr. Powell has sufficient discretion to continue postponing cuts indefinitely. ” harriet clarfeldt
How active is the UK housing market?
Investors will look to the latest signals on the health of the housing market this week for fresh clues about how quickly and if the Bank of England is likely to cut interest rates this year.
The Bank of England's March mortgage approvals data, released on Tuesday, will show whether lower borrowing costs continue to stimulate economic activity from mid-2023 onwards. Net mortgage approvals rose to 60,400 in February, the highest level since September 2022.
Data on average house prices published by lender Nationwide will also provide an indication of whether easing mortgage rates is helping to stabilize the property market. Prices in March unexpectedly fell by 0.2% from the previous month, but were still 1.6% higher than the same month last year, the largest annual increase since December 2022.
“If mortgage market and home price data continue to improve, it would be consistent with policymakers' view that the economy is recovering,” said Tomasz Wiladek, an economist at T. Rowe Price. “If there is bad news in the housing market and the mortgage market; [BoE] We are approaching production cuts in early summer, but the good news is unlikely to make a big difference. ”
Sterling has strengthened recently on a series of resilient economic indicators, prompting investors to back off on expectations for a BoE to cut interest rates. The market is currently pricing in September's borrowing cost reduction, which could result in another quarter-point reduction in the remainder of 2024.
The currency has fallen 1.7% against the dollar since the beginning of January. Most other major currencies fell even more sharply due to the dollar's rise. Stephanie Stacey
