Three important things to watch in the markets this week:
1- US Inflation Figures: Investors will be closely eyeing US inflation data on Friday with the Personal Consumption Expenditures (PCE) Price Index, which is the Federal Reserve’s preferred inflation gauge, expected to remain elevated in March. Recent data suggest that progress in taming inflation may have stalled, alongside strong labor market data, and geopolitical tensions in the Middle East leading to higher oil prices. Comments from Federal Reserve officials including Chairman Jerome Powell have led investors to scale back their expectations for any interest rate cuts.
2- Purchasing Managers’ Index (PMI) Data: Investors will closely monitor PMI data from the Eurozone, the United States, and the United Kingdom on Tuesday for any signs of inflation resurgence, especially in the services sector. PMI figures may indicate that the Eurozone economy is rebounding after March’s data showed activity stabilization and a decline in services inflation, keeping the European Central Bank on track for a widely expected interest rate cut in June.
3- Bank of Japan Meeting: Investors will look for clues on the timing of the next interest rate hike when the Bank of Japan releases its new quarterly growth and inflation forecasts at a meeting on Friday. Bank of Japan Governor Haruhiko Kuroda said last Friday that the central bank is “very likely” to raise interest rates if core inflation continues to rise and begins to reduce its massive bond purchases in the future. These statements have bolstered expectations that the central bank will raise its target interest rate on the short term from the current range of 0-0.1% sometime this year. The yen has declined since the Bank of Japan’s decision last month to end eight years of negative interest rates, with markets focusing on its cautious guidance suggesting borrowing costs will remain stuck around zero for some time.
