Market Briefing: Calm Returns Ahead of Long Weekend
Egghaustion is setting in across the financial markets this morning, with liquidity ebbing and trading ranges shrinking ahead of a long Easter weekend. For the session, index futures are essentially unchanged, oil prices are retreating, Treasury yields are ticking lower, and the dollar is flat.
The New Zealand dollar—the kiwi—is the weakest performer on the currency tables, down 0.6 percent after surging when the central bank shocked markets with another 50 basis-point rate hike on Tuesday night. Markets appear to have concluded that the decision amounts to a policy mistake that might have negative effects on the economy in the longer run - consequences that could outweigh the yield pickup available.
Canada is expected to report roughly 10,000 jobs were created in March, with the unemployment rate ticking up to a—still historically-low—5.1 percent. Deviations are unlikely to rock markets - investors are largely inured to statistical aberrations in the data, and few expect the Bank of Canada to respond with a policy shift in the near future.
Initial claims for US jobless benefits are seen rising to 200,000 in the week ended April 1, but some forecasters—including Goldman Sachs—think a 240,000-claim print is possible as seasonal adjustment issues are rectified. Despite a raft of high-profile corporate layoff announcements, weekly claims have remained near pre-pandemic averages for several months.
Tomorrow’s non-farm payrolls report could generate an outsized reaction in holiday-thinned currency markets. After a 311,000-position gain in the prior month, economists think roughly 240,000 jobs were added in March, and the unemployment rate is expected to hold near 3.6 percent - but recent evidence of cooling labour market conditions has raised the risk of a downside surprise, and the forecast dispersion has widened considerably. The US Treasury market will be open during shortened hours, but banks and equity markets in the US and Europe will be closed, and over-the-counter foreign exchange trading will be extremely limited.
Odds on a quarter-point hike at the Federal Reserve’s May meeting are currently holding near 40 percent, but with headline inflation, retail sales, and core personal consumption expenditures numbers due later in the month, there’s significant potential for an adjustment in market expectations.
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST
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