Markets await March employment data
The Federal Reserve Chairman continued to play a familiar tune Wednesday. “Given the strength of the economy and progress on inflation, we have time to let the data that comes in guide our policy decisions,” he said in a speech at Stanford University.
Thursday brought new data on weekly jobless claims for Powell and his colleagues. Economists believe the number will be 214,000, slightly higher than the previous week but in line with the average over the past six months - and unlikely to be commensurate with the faltering labor market.
Then comes the big deal on Friday: March nonfarm payrolls data could send markets shaky. Analysts polled by Reuters estimate 200,000 jobs were created in March, a relatively big decline from 275,000 in February. However, recent US data turned out to be hotter than expected.
However, Wednesday was a sign of a potential crack in the armor of the American economy. The Institute for Supply Management's assessment of the services sector was much weaker than expected, with price growth hitting a four-year low.
The ISM reading undercut the dollar, which fell to end the session 0.5% lower, although the 10-year Treasury yield remained near its highest level since November.
In currency markets, where volatility has dropped sharply, the focus remains on whether Japan will intervene to support the yen, which is trading near its lowest level in 34 years.
European stocks rose slightly on Thursday, with oil trading at a five-month high.
Divergence in the game
The divergence in investor expectations for rate cuts is finally starting to emerge as Europe's economy lags behind the US. Traders now see fewer than 70 basis points of cuts from the Fed by December, but expect almost 90 from the European Central Bank.
Eurozone inflation fell to 2.4% in March, data showed on Wednesday, lower than expected and very close to the ECB's 2% target. In Switzerland, inflation is just 1%, data showed on Thursday.
US consumer inflation data for March will be published next week: in February, inflation was 3.2%.
Five Fed officials, including Philadelphia's Patrick Harker and Cleveland's Loretta Mester, are scheduled to speak Thursday after Atlanta's Raphael Bostic suggested rate cuts might not come until the fourth quarter on Wednesday.
