The Week Ahead: Private Sector PMIs, Fed Minutes, and the Jobs Report

Highlights

• The FOMC Meeting Minutes, the US Jobs Report, and the ISM Non-Manufacturing PMI will influence bets on a Q1 2024 Fed rate cut.
• Euro area inflation figures and private sector PMI numbers could impact the ECB stance on interest rates.
• Private sector PMI numbers from China will affect market risk sentiment.

The US Dollar

The US manufacturing sector will draw investor interest in the first half of the week. The S&P Global US Manufacturing PMI (Tues) and ISM Manufacturing PMI (Wed) need consideration. A more marked contraction across the manufacturing sector could support bets on a Q1 2024 Fed rate cut.

On Wednesday, the US JOTLs Job Openings Report and FOMC Meeting Minutes warrant investor attention. A pickup in job openings could impact Fed rate cut expectations. However, the FOMC Meeting Minutes could reveal how willing the Fed is to cut rates within the first quarter.

In the second half of the week, the services sector and labor market will be in the spotlight. The ISM Non-Manufacturing PMI (Fri) and US Jobs Report (Fri) will be the key reports of the week. Weaker service sector activity and softer labor market conditions would support bets on a Q1 2024 Fed rate cut.

The EUR

On Tuesday, manufacturing PMIs for euro area member states and the Eurozone will influence the EUR/USD. Deterioration in manufacturing sector conditions could drive expectations of a euro area recession. Beyond the headline numbers, investors must consider the sub-components, including prices, new orders, and employment.

German unemployment figures (Wed) need consideration. A deteriorating labor market could impact consumer spending and dampen demand-driven inflation. Softer inflationary pressures could allow the ECB to begin discussions about rate cuts.

On Thursday, French and German inflation numbers and euro area services PMIs warrant investor attention. A pickup in inflationary pressure and service sector activity would align with recent ECB commentary, warning of higher-for-longer interest rates. The services sector remains the driving force behind inflation. Investors must consider the sub-components, including employment, prices, and new orders.

Eurozone inflation numbers and German retail sales figures wrap up a busy week for the European markets.

The Pound

UK manufacturing (Tues) and services PMI (Thurs) numbers will impact buyer demand for the Pound. However, the services PMI will garner more interest, accounting for over 70% of the UK economy.

Beyond the headline numbers, sub-components, including prices, employment, and new orders, will move the dial. Upward trends in input prices would align with hawkish comments from BoE Governor Bailey about interest rates.

On Friday, the UK housing sector and construction PMI numbers for December will be in focus. An improving UK housing market could ease fears of a UK economic recession. Economists consider housing sector data as leading indicators for the economy.

Beyond the numbers, Bank of England commentary will move the dial.

The Loonie

Employment figures (Fri) will drive buyer demand for the Loonie. Weaker labor market conditions could allow the Bank of Canada to cut rates at a more marked pace.

Ivey PMI numbers for December also need consideration but will likely play second fiddle to the employment figures.

From elsewhere, economic indicators from China and crude oil inventory numbers also need consideration.

The Australian Dollar

The RBA is the first to deliver an interest rate decision on Tuesday. After the December RBA Meeting Minutes, the Aussie dollar will respond to the Rate Statement. Further threats of rate hikes would drive the buyer for the Aussie dollar.

However, economic indicators from China also warrant attention. On Sunday, private sector PMI numbers from China sent mixed signals. The manufacturing sector contracted at a more marked pace, while the non-manufacturing sector saw a modest pickup in activity.

On Tuesday, the all-important Caixin Manufacturing PMI will indicate the demand environment at the end of the year. However, the Caixin Services PMI will also move the dial on Thursday.

The Kiwi Dollar

There are no economic indicators to influence investor appetite for the Kiwi dollar. However, private-sector PMI numbers from China warrant attention.

The Japanese Yen

It is a shortened week for the Japanese Yen. The markets are closed from Monday to Wednesday. On Friday, the Services PMI for December will draw investor interest. A pickup in service sector activity could raise bets on a Bank of Japan pivot from negative rates. Investors must also consider the sub-components, including prices, employment, and new orders.

Beyond the numbers, Bank of Japan commentary needs monitoring. Comments regarding a pivot from negative rates would move the dial.

Out of China

Private sector PMI numbers from China will influence market risk sentiment in the first week of 2024. The Caixin Manufacturing PMI (Tues) and Caixin Services PMI (Thurs) will garner investor interest. A slowdown in private sector activity would raise concerns about the global economic outlook.

Economists forecast the Caixin Manufacturing PMI to fall from 50.7 to 50.4 in December.