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 looking into the week ahead, we have a wide range of events to, to keep an eye on. Perhaps you want to guide us through.

Neil Staines

Yeah thanks Matt. Markets have been a little calmer this week as the aftermath of the banking induced rate market capitulation, and a very light top tier data calendar. There has been some time for reflection, as we suggested last week but it is clear from market pricing that significant uncertainties remain. As we discuss in the blog this week, we continue to see a significant non-linear consumption risk, as a function of absolute level of prices and also of taxes and of interest rates and thus downside risks to growth in inflation and also rates. Looking ahead into next week, there are a few important points we have our eyes on as a barometer of this evolving macro backdrop.

Firstly in the UK the close to this week highlighted the divergent macroeconomic signals with a bigger than expected house price decline, but final upward revision to Q4 GDP and improving business sentiment. Next week we look out for commentary from MPC members Tenreyro and Pill specifically Professor Tenreyro has been vocally at the dovish end of the MPC spectrum for several months, dissenting the most recent rate hikes. Indeed she dissented in favor of just 25 basis points when bank rate was hiked 50 basis points to 3% in November and has dissented in favor of no change in rates since, bank rate now standing at 4.25% . Commentary this week will be interesting in relation to her analysis of the growth backdrop and the upside risks to inflation. Risks that are likely to come further into question as base effects take headline inflation sharply lower over the coming months , in our view significant implications for monetary policy. Also on Tuesday we hear from Bank of England, chief Economist, Huw Pill and any commentary about the evolving balance of risks between inflation of growth from him will also be key. Potentially an interesting week for the UK and for Sterling.

Secondly, we get policy decisions from the Antipodes with both the RBA and RBNZ in action. The RBA is expected to pause rates as alluded to in the minutes of the March meeting with growth slowing and signs of a new top in inflation forming. Action and comment however, will be keenly watched. Now across the Tasman, the RBNZ are expected to hike 25 basis points to 5%, and with markets pricing a subsequent hike in May or in July. The commentary will also be very important and potentially market moving for the Kiwi.

Then finally, the big event of next week is the US Employment Report for March rather inconveniently payroll Friday next week also happens to be Good Friday, and thus a holiday across the UK and much of Europe. Nonetheless, it'll be the most watched and likely most consequential data print of the week. Expectations are for around 240,000 payroll for the month of March, keeping the unemployment rate at 3.6% and for the average hourly earnings rate to moderate further to 4.3%, closer to the 3.5% deemed broadly consistent with inflation at target. A further strong print will add to the modest rate recovery that we've seen following recent bank sentiment stabilization. But for choice, our bias would be to expect weaker payroll growth and an uptick in the unemployment rate. But either way, we'll be putting our Easter eggs to one side at 1:30PM on Friday, and paying close attention as payrolls come out next week.

Matt Jones

Fantastic. Thank you Neil. A lot to be looking out for, and yes, all eyes, no doubt on the US on Friday but also equally on the Easter eggs. I'm sure. In the meantime, we have the weekend. And we are back to a slightly fuller schedule this weekend, aren't we?

Neil Staines

We are indeed. Sport is indeed back, although I did enjoy the slower pace of match play golf last weekend. The Premiership is back with big games for Liverpool, Chelsea, Brighton, Brentford, Newcastle, and Man United at the top. And there's a true six pointer at the London Stadium on Sunday as Westham host Southampton. Formula One is back as the team's face off in Australia. Red Bull is still out ahead of the pack, who are in desperate need now of some banana skins and triple red shells. AJ is also back this weekend, Anthony Joshua fighting Jermaine Franklin at the O2 Arena in London. Let's hope he stays back.

Matt Jones

That certainly is something for everybody this weekend. Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you in two weeks time after the good Friday Bank holiday.

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".


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