of the week ahead


Matt Jones

Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.

My name is Matt Jones, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.

Welcome back, Neil. It's great to have you here with us again.

Neil Staines

Thank you very much Matt. It's great to be here.

Matt Jones

So, we are staring down the barrel of quite a busy week, I think, with a lot of data coming up. So, without further ado, can you tell us what you've got your eye on in the week ahead?

Neil Staines

Firstly, we take a close look at the data prints, the US ISM data for April comes in two parts next week, manufacturing on Monday, and services on Wednesday. PMI equivalence with variable correlations showed a bounce in activity, so markets will be closely watching for corroboration or otherwise. In Europe, we get the April Flash CPI data, possibly tipping the balance for the ECB between 25 or 50 basis points at they're meeting next week. A slight bounce in some of the member states inflation prints this week, so maybe erring towards the top side. Perhaps the biggest data focus of the week, however, will be on Friday's non-farm payroll print. Expectations offer 170,000 headline payroll gain with the unemployment rate ticking up to 3.6% and average hourly earnings unchanged at 4.2%. Plenty to keep us entertained amid plenty of developed markets, Central Bank focus next week.

Secondly, we focus on that central bank action and developed markets. The RBA on Tuesday are expected to leave rates unchanged at 3.6% as signs that tight monetary policy is beginning to damp consumption, and that inflation has peaked after some significant volatility around the turn of the year. And the RBA are certainly more attuned to the lagged effects of previous cumulative rate hikes. More significantly and with a greater degree of uncertainty, the ECB looks set to hike rates for an eighth consecutive meeting as core inflation shows no clear signs of peaking unless Tuesday's print surprises that is. The question remains, however, what is the appropriate policy increment? Is it 25 or is it 50? Markets are split with current pricing in around 30 basis points. The case may be decided by the governing council discussions about the appropriate pace of QT going forward. A 50 basis point move may be accompanied by a QT remaining at the 15 billion euros per month already decided 25 basis points may elicit a bigger quantitative tightening. Terminal rate pricing in Europe is close to 4%, so even if we get a 50, it's unlikely the ECB signal and end June, July, and even September still remaining live. The ECB will be very closely watched.

Then finally, the big focus of the week, however, will likely be the FOMC meeting on Wednesday. Markets are pricing around 22 basis points, and there is little doubt about the active Fed policy increment. As we discuss in this week's blog, the case for any further rate hikes is not clear to us as supply and demand show closer balance in goods and in labor markets. But it seems unlikely that the Fed will disappoint such clear market expectations at this late stage. We maintain the core macro view that inflation will drop significantly through the rest of 2023 economy with a falling aggregate demand. In many ways, the press conference will be more important as we feel the current level of uncertainty around the bank credit suggested the Fed could or should, in our view, refrain from signaling any further rate hikes. The significance of the Fed effectively announcing they are done should not be underestimated and it is relevant for all asset classes, and on that basis, Wednesday's Fed really is essential viewing.

Matt Jones

Essential viewing indeed and talking of which, it's almost the weekend. So what do you have your eye on?

Neil Staines

Absolutely, yes. Thanks Matt. Long weekend in the UK with the Mayday Bank holiday, the first of three, four day weeks in May, with King Charles III Coronation and the Spring Bank holidays on the 8th and 29th. Plenty of sport to help us pass the time. Premiership football is back, now that the title appears to be decided there is plenty of action at the bottom with West Ham, Southampton, Bournemouth, Forest, Leeds, Leicester and Everton, all in action and in danger. All seeking to avoid the most expensive league positions in world football. Formula One is back with the Azerbaijan Grand Prix, after almost four weeks out, we'll be watching the pack very closely to see if they have made up any ground on the Red Bulls and at a slightly slower pace world Championship Snooker concludes from the Crucible. But for me the highlight of the weekend might be the weather with the sun threatening to make an appearance. It might just be possible to dust off the barbecue. Fingers crossed.

Matt Jones

Absolutely. Fingers crossed. Thank you again for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again in two weeks time.

Thank you for joining us for "The Long and Short of the Week Ahead". Further insights are available on our website eurizonsljcapital.com/insights. We look forward to you joining us again next week for more insights into macro-economic events and "The Long and Short of the Week Ahead".


This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.


Subscribe to our insights

If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.

    I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com

    Envelopes on a wood background

    Our Research

    Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.

    research page photo