GEMFOREX - weekly analysis

As we enter the first week of April, here are 5 things to look out for this week:

1.Nonfarm payrolls

Fridays nonfarm payrolls report will be watched by traders for a fresh update on the condition of the labor market, which has remained strong over the past year in the face of multiple rate hikes by the Federal Reserve.

Economists are expecting the U.S. economy to have added 238,000 jobs in March, after an increase of 311,000 in February. Average hourly earnings are forecast to have increased at an annual rate of around 4.3%, which would be the slowest rate since July 2021.

The March employment report will be the last before the Feds upcoming May meeting, with investors split over whether policymakers will raise rates one last time. If the increase in jobs is above 200,000, this may bolster expectations for a 25-basis point rate hike. 

Fed officials have indicated that they expect rates to remain around current levels for the rest of this year to help combat inflation.

2.Other data

Ahead of Fridays all important March jobs report, the economic calendar includes reports on February job openings on Tuesday and March data on private sector hiring on Wednesday.

ISM purchasing managers surveys of manufacturing and service sector activity are due out on Monday and Wednesday, respectively.

Several Fed policymakers will also be making appearances during the week.

Fed officials have indicated that they expect rates to remain around current levels for the rest of this year to help bring inflation back down to the banks 2% target. However, the officials will also have to weigh the effect of higher interest rates on financial stability after the recent turmoil in the banking sector.

3.Equity markets

U.S. equity markets posted solid gains in the first quarter. This came despite a steep selloff in bank stocks after the collapse of two regional banks ignited fears over a broader financial crisis.

The Nasdaq gained 16.8%, its largest quarterly percentage increase since 2020. The S&P 500 rose 7%, and the Dow Jones Industrial Average ended the quarter up 0.4%.

Whether those gains leave stocks more vulnerable to an economic downturn, which may have been brought closer by tumult in the banking sector, remains to be seen.

To what extent equities have factored in a possible recession - and whether the economy will experience one - has been a point of contention on Wall Street.

4.OPEC meeting

OPEC+ is likely to stick to its existing deal to cut oil output at a meeting on Monday, Reuters reported, after oil prices recovered following a drop to 15-month lows.

Oil has recovered towards $80 a barrel for Brent crude after falling to near $70 on March 20, as fears ease about a global banking crisis and as a halt in exports from Iraq's Kurdistan region curbs supplies.

OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies led by Russia, is due to hold a virtual meeting of its ministerial monitoring panel, which includes Russia and Saudi Arabia, on Monday.

After those talks, the next full OPEC+ meeting is not until June.

Falling oil prices pose a problem for most OPEC+ members, as their economies rely heavily on income from oil.

5.Interest rate decisions (RBA, RBNZ)

The Reserve Bank of Australia will meet on Tuesday with a decision on whether to hike rates.

Data last week showed that Australian inflation dropped to an eight month low of 6.8% year-over-year in February, prompting investors to pretty much drop any chance for a 25-basis point rate hike.

RBA Governor Philip Lowe has said the central bank was closer to pausing its rate increases because monetary policy was now in restrictive territory. He suggested that a halt could come as soon as April depending on the data.

Meanwhile, markets are still betting on another 25-basis point rate hike from the Reserve Bank of New Zealand when it meets on Wednesday.

Source: investing.com

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