Week ahead: US jobs data, China PMIs and Eurozone inflation

Here are the week’s key events: 

The strength of the U.S. labour market has been consistently better than feared, but there are signs of cracks. The latest round of nonfarm payrolls and job openings will be the main event of the week for market watchers. 

Eurozone inflation data might tell us whether the European Central Bank is maybe going to cut before June. PMI data from the world’s major economies will also be monitored in an Easter holiday-shortened trading week. 

Monday: China Manufacturing and Services PMI 

Traders will be digesting the latest China manufacturing and services PMI data. Manufacturing has been in contraction since October but is expected to show signs of a pick-up. The US ISM survey will also be monitored closely – the last reading showed economic activity in the manufacturing sector contracted in February for the 16th consecutive month. 
 

Meanwhile, Europe catches up with North America with its daylight savings shift – so the usual trading hours apply. Easter Monday is a holiday in Europe and the UK.  

Tuesday: German CPI Inflation 

German CPI inflation is the highlight of the European calendar. Inflation has been steadily coming down lately, receding from +3.7% in December to +2.9% in January and +2.5% in February. 

The figures will be important for the euro and expectations for whether the European Central Bank has the room to cut interest rates sooner than June. Later the JOLTS jobs openings report will be parsed for the health of the US labour market. 

Openings have been trending down, but at 8.9m in January the market labour remains rather tight. We also hear from FOMC members Mester and Daly. 

Wednesday: China Caixin Services PMI, EU Inflation Data 

The Asian session starts with the Caixin services PMI for China. EU inflation data follows. The euro area's annual inflation rate was 2.6% in February 2024, down from 2.8% in January. A year earlier, the rate was 8.5%. But underlying inflation remains sticky. 

Core inflation, stripping out volatile components of energy, food, alcohol and tobacco, was 3.1% — above the 2.9% expected and still well above the ECB’s target. However, we know that central banks are willing to tolerate higher inflation. US ADP employment figures and the ISM services report are due later. 

Thursday: March CPI Data 

The Swiss National Bank cut rates by 25bps last week sending the Swiss franc lower against peers, the euro jumping to its best since July 2023 against the franc. Underpinning the SNB’s decision was a sharp decline in annual inflation, which fell to 1.3% in Jan and 1.2% in Feb.  
 

Therefore, we will watch CHF crosses closely with the morning release of the March CPI inflation data. ECB monetary policy meeting accounts and the latest weekly initial jobless claims data from the US are also due up.  

Friday: U.S. Nonfarm Payrolls 

Jobs day! Total nonfarm payroll employment rose by 275,000 in February, another hot reading vs the forecast. But the unemployment rate increased to 3.9%, worse than expected, and revisions scrubbed 167k from the last two months. 

Downward revisions say the labour market wasn’t as strong as thought, so all else equal the Fed ought to be objectively closer to a cut than we thought. Wages were a tad lighter, up just 0.1% on the month, +4.3% from a year ago, down from the 4.5% gain in January.  

So, payrolls were still hot but trending towards higher unemployment and wage growth cooling, which is why the Federal Reserve is happy to stick to three cuts this year. Will this month’s data alter the outlook? 

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