Key Events: Are US Services Weaker Than Expected?
- By Macro Hive
Key Events
G10
In the US, the key data is:
- Services PMI – Monday. Consensus expects only a limited decline to 50.2 versus March’s 50.8, which aligns with services surveys weakening by less than manufacturing. See our Event Monitor for market impact.
In the Eurozone and UK, the main events will be:
- Bank of England rate decision – Thursday. We expect the bank to cut rates by 25bp with room for a more dovish tone. The updated MPR will be interesting given tariff risks. Inflation is slightly weaker than February’s MPR, but April is the big unknown. Meanwhile, labour market loosening is accelerating. That the LFS unemployment rate is near MPR estimates belies underlying weakness.
Elsewhere in G10:
- Switzerland CPI – Monday. Inflation remains weak and a stronger currency poses a downside risk. Global growth threats likely push the SNB back towards 0%.
- New Zealand labour market report – Tuesday. Unemployment likely edges up to 5.3%, from 5.1%, but contracting employment growth has peaked with survey data suggesting an improvement ahead.
- Canada jobs report – Friday. Recent reports have been weak, so the risk of an upside surprise could be higher. But overall, job growth should remain sluggish.
EM
- Czechia inflation – Tuesday. Favourable base effects and lower fuel prices should mean a sharp drop in YoY inflation this month. Higher food prices are one upside risks.
- Hungary inflation – Friday. Renewed FX weakness is an upside risk for inflation. But with the profit cap on foodstuffs, lower oil prices and a favourable base, YoY inflation should drop back nearer the upper buffer of the NBH target.
- China trade – Friday. According to PMI and HF container throughput data, we expect a 10-20% decline in exports.
Central Banks in Action
- FOMC meeting – Wednesday. I expect the Fed to remain on hold but be less hawkish in its economic and policy assessment.
- BoE policy decision – Thursday. Speakers (Bailey and Pill on Friday) are likely to sound more dovish given trade tension. But it may not be until June or August that the full impact of H1 one-offs on CPI become clear, and the 2024 budget impact on employment understood.
- Czechia rate meeting – Wednesday. Renewed disinflation and rising downside risks to growth indicate another 25bps cut this month. We expect this will be the last cut, leaving the terminal rate at 3.5%.
- Poland rate meeting – Wednesday. Glapinki’s dovish U-turn last month enabled a May rate cut. And with April inflation dropping to a 10-month low, continued deceleration in wage growth and lacklustre real economy data, we expect the NBP to cut by 50bps.
Markets to Watch
- UK rates – we see value being long UK real rates on the basis that the UK economic outlook is bleak, but the recent rally in nominal rates (and STIR) has been led by cheapening energy and a bleaker global outlook, which may fade.
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