The week ahead - 4-8 March 2024

Eurozone: The ECB is expected to keep policy rates unchanged at the March meeting. Governing Council members, including president Lagarde, have signalled that they have become more optimistic about inflation, but that further progress needs to be made in the disinflationary process before they could be sufficiently confident that inflation was set to hit the ECB’s target in a timely manner and in a sustainable way. Therefore, we continue to expect a first rate cut in June.

US: Labour market data will be the key focus this week, with payrolls for February and job vacancy data for January. We and consensus expect a slowing in jobs growth following the blockbuster January figure, with a high chance of downward revisions to previous data. A key focus for markets will be wage growth, which picked up in January - we and consensus expect a modest cooling. We also expect a modest decline in job vacancies, but this series is highly volatile and prone to revisions.

Aside from the data, markets will also be focused on Chair Powell's semi-annual testimony to Congress. He is likely to sound confident on the prospects for a soft landing, while emphasising that the Fed remains alert to inflation risks. On balance, we think this and other commentary from Fed officials will probably be neutral for markets given the significant repricing of rate cuts that has already taken place.

China - Following – on balance - quite stable manufacturing PMIs for February, and a 0.7 point rise in the official non-manufacturing PMI, Caixin’s services PMI (due on Tuesday) is expected to pick up slightly, adding further signs of a stabilisation of the Chinese economy – on the back of ongoing piecemeal monetary easing and targeted support.