What To Look At Next Week

The US dollar extended its recent gains even as the yield on the 10-year Treasury pulled back by more than 15 basis points. The euro, the 7-Up to the dollar's cola, fell to its lowest level since last November and the greenback rose to new highs for the year against most of the major currencies, save the sterling and the Canadian dollar.

While recent US data have prompted some scaling back of Q1 GDP forecasts, 5%-6% still likely puts it atop the major economies. Fed officials' latest projections showed a median GDP forecast this year at 6.5% (range 5.0%-7.3%). The median forecast in the Bloomberg survey is 4.8%. The survey also found that economists look for growth to peak around 7% at an annualized pace in Q2 and Q3.

Although several US states are reporting higher contagions, the acceleration of inoculations is set to continue. More states are making the vaccine available to all adults well ahead of schedule. No country is matching the US fiscal and monetary stimulus and success with the vaccine rollout. The UK economy may open a couple weeks before the US, but most of its growth in Q2 will be needed to offset the contraction in Q1.

The week ahead will be shortened in Europe by the extended Easter holiday. Still, four economic reports will help fine-tune perceptions of the divergence: US employment data, eurozone inflation, Japan's Tankan Survey, and China's PMI.

The US March jobs report will be released on April 2, Good Friday. It is arguably the most important of next week's economic data points. The Fed now targets the average rate of inflation and puts more emphasis on the labor market, which several other central banks also appear to be doing. The previous language about "full employment" has also been eschewed in favor of maximum and inclusive employment references.

Some 9.5 million fewer Americans are working now than on the eve of the pandemic. This may be the most important economic fact fueling the Fed's stance. Several other central banks seem to be putting more emphasis on labor market developments. The US economy grew by nearly 380 thousand jobs in February (465 thousand private sector positions), and the pace is expected to have accelerated to around 580 thousand in March.

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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