Weekly Market Outlook (06-10 May)

UPCOMING EVENTS:

• Monday: China Caixin Services PMI, Eurozone PPI, Fed SLOOS.
• Tuesday: RBA Policy Decision, Switzerland Unemployment Rate, Eurozone Retail Sales.
• Thursday: Japan Average Cash Earnings, BoJ Summary of Opinions, BoE Policy Decision, US Jobless Claims.
• Friday: New Zealand Manufacturing PMI, UK GDP, Canada Jobs report, US University of Michigan Consumer Sentiment survey,

Tuesday

The RBA is expected to keep the Cash Rateunchanged at 4.35%, although the risk of a shock rate hike cannot be dismissed.The lastinflation report was a cold shower forrate cuts expectations in 2024 as the Q1 CPI figures beat forecasts across theboard by a big margin. The market pushed back the expectations for the firstrate cut further away with the first move now seen sometime in Q2 2025. Thecentral bank stated several times that the best contribution that monetarypolicy can make to the wellbeing of the Australian people is to ensure thatinflation returns to target in a reasonable timeframe.

Thursday

The Japanese Average Cash Earnings Y/Y isexpected at 1.5% vs. 1.8% prior. The BoJ continues to see the achievement oftheir inflation target and stating that another rate hike remains dependenton the data. The timing for such a move remains uncertain though with Julyand October being on the table, although the latter is the most probable one.Governor Ueda has also mentioned that irrespective of what the data would sayin the near future, they would like to find a way and timing to reduce theamount of JGB purchases.

The BoE is expected to keep interest ratesunchanged at 5.25%. The latestinflation report showed the headline andcore figures moderating further but the services inflation measure, which iswhat the central bank is more concerned about, remaining sticky at 6%. Onthe labour market side, thelast data showed an increase in theunemployment rate and job losses with high wage growth figures. At the lastmeeting, the vote split changed with themost hawkish members joining the hold camp and Dhingra remaining the usualdissenter voting for a cut. The market expects the first rate cut in Septemberand it’s unlikely that we will see the BoE making major changes at the upcomingdecision.

The US Jobless Claims continue to be oneof the most important releases to follow every week as it’s a timelierindicator on the state of the labour market. This is because disinflation tothe Fed\'s target is more likely with a weakening labour market. A resilientlabour market though could make the achievement of the target more difficult.Initial Claims keep on hovering around cycle lows, while Continuing Claimsremain firm around the 1800K level. This week Initial Claims are expected at 210Kvs. 208K prior,while there is no consensus at the time of writing for Continuing Claimsalthough the prior release showed a decrease to 1774K vs. 1797K expected and 1781Kprior.

Friday

The Canadian labour market report isexpected to show 17.5K jobs added in April vs. -2.2K in March with theunemployment rate ticking higher to 6.2% vs. 6.1% prior. The lastreport missed expectations across the boardwith job losses and a big jump in the unemployment rate. There was also anincrease in wage growth, which is what the BoC is more concerned about, althougha looser labour market should depress wage gains going forward. The marketexpects the central bank to deliver the first rate cut in June, although the probability for a July move is higher.