U.S. Growth, currency forecasts, global trends
The week is marked by several key economic data releases that are expected to influence market sentiment and currency valuations:
- US Growth: The U.S. economy’s expansion at a 3.2% annualized rate in the fourth quarter of 2023 indicates a resilient economic environment. Despite a deceleration from the previous quarter, the growth was fueled by strong consumer spending and a surprising boost from trade.
- Jobs: The labor market shows signs of easing, with nonfarm payrolls rising by 275K, surpassing expectations. However, revisions and a slight increase in the unemployment rate to 3.9% suggest a more nuanced picture.
- Profits: Corporate profits ended 2023 on a high note, with information technology and communication services sectors leading the charge. However, forward guidance from management teams may temper expectations for 2024.
- Inflation: Inflation is receding gradually, with the February CPI report showing a 0.4% month-over-month increase. Core services, excluding food and energy, have seen modest increases, indicating a continued trend towards the Fed’s 2% target.
- Rates: The Federal Reserve maintained rates at 5.25%-5.50% during its March meeting. The year-end core PCE is revised up to 2.6%, and growth for 2024 is revised up to 2.1%, suggesting a cautious approach to policy easing.
Market Predictions:
- EUR/USD: The pair is expected to face bearish pressure but could find support if inflation data softens, potentially leading to a less aggressive stance from the Fed.
- USD/JPY: The Yen’s weakness may continue unless Japanese officials intervene. The pair’s strength will be tested by U.S. Treasury yields and Fed commentary.
- GBP/USD: The Pound is at a critical juncture, with potential rate adjustments by the BoE influencing its direction against the USD.
- AUD/USD: The Australian Dollar’s trajectory hinges on global risk sentiment and U.S. economic indicators, particularly inflation data that could sway the Fed’s policy outlook.
- Gold: Gold prices are expected to maintain bullish momentum, with the potential to test the $2,000 mark. The dollar’s reaction to inflation figures will be a key determinant.
Global Economic Trends:
The global economy presents a mixed outlook, with slow growth and stubborn inflation clouding the forecast for equities. J.P. Morgan Research anticipates only a modest risk of recession in the near term but expects an end to the global expansion by mid-2025.
Investment Considerations:
Investors should remain vigilant and consider diversifying their portfolios. Monitoring economic indicators and staying informed on central bank policies will be crucial for making informed decisions in a potentially volatile market environment.
