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Lagarde defies bond markets and Biden sets the next partisan clash

USD

Markets ended last week on a more positive tone, with the S&P 500 and Dow Jones jumping to a new record high. The risk-on sentiment seen Friday also spilled over into the bond market, with the U.S. 10-year yields rising for the first time that week. This week, market participants will be waiting for updates from President Joe Biden about his infrastructure plan which could cost north of $3 trillion. The President is expected to unveil his plan when he travels to Pittsburgh on Wednesday. Then, the focus will turn to the manufacturing PMI on Thursday, which will be eyed for rising inflationary pressures. There will also be a big focus on the U.S., with the non-farm payroll data released on Friday. Key figures coming up:

  • On Monday (03/29): Dallas Fed Manufacturing Survey (Mar)
  • On Wednesday (03/31): U.S. President Joe Biden speech | Pending Home Sales (Feb)
  • On Thursday (04/01): Construction Spending (Feb) | Vehicle Sales (Mar) | Jobless Claims (weekly) | ISM Manufacturing PMI (Mar)
  • On Friday (04/02): Non-farm payrolls, Unemployment, and Wages (Mar)

EUR

The virus situation across the bloc, as well as vaccine supply and progress, were the main narrative over the last week. Lagging behind the U.K. in vaccinating its population, the EU continues to make efforts to find a peaceful solution for the impasse between the pharma giant AstraZeneca, the U.K, and the EU. The week ahead will bring retail sales for Spain, and consumer and industrial sentiment across the bloc on Tuesday. Then, the market’s attention will be on inflation readings for the Eurozone on Wednesday. The Manufacturing PMI report will be in focus on Thursday, as both supply chain disruptions and renewed restrictions weigh on economic activity. On the same day, it is expected that German retail sales will weigh on the EUR. Key figures coming up:

  • On Monday (03/29): Business Climate (Mar)
  • On Tuesday (03/30): Spain Retail Sales (Feb) | Eurozone Industrial and Consumer Sentiment (Mar) | Germany Consumer Price Index (Mar)
  • On Wednesday (03/31): Germany Unemployment (Feb) | Eurozone Consumer Price Index (Mar)
  • On Thursday (04/01): Germany Retail Sales (Feb) | European Central Bank Economic Bulletin | Manufacturing PMI (Mar)

GBP

The GBP/USD saw some gains over the last week after U.K.-EU tensions over vaccine supplies eased and vaccinations in the U.K. kept progressing at a good pace. Moreover, market players also continued to see the U.K’s timeline to re-open the economy as realistic and therefore the Pound showed better resilience than other G10 currencies to USD appreciation. The week ahead will bring the finalized fourth quarter GDP numbers on Wednesday. However, the out-of-date numbers are unlikely to have a substantial impact on the GBP. The manufacturing PMI survey on Thursday will be eyed for rising inflationary pressures. In parallel, there are two scheduled Bank of England’s speakers (Saunders and Tenreyro) over the week. Key figures coming up:

  • On Monday (03/29): Money Supply, Mortgage Approvals and Consumer Credit (Feb)
  • On Tuesday (03/30): BoE Consumer Credit (Feb)
  • On Wednesday (03/31): GDP, Business Investment, and Current Account (Q4)
  • On Thursday (04/01): Manufacturing PMI (Mar)
  • On Friday (04/02): Holiday - Good Friday

JPY

Last week, the U.S. dollar continued to add pressure on the Japanese Yen, though higher bond yields were not the main reason for that. The latest Japanese PMI data pointed to a general sustained deterioration in business activity in March as Japan is struggling to bring Covid-19 cases back down. The upcoming week kicks off with February’s retail sales and unemployment rate on Monday, followed by February’s Industrial Productions on Wednesday. Ending the week, the Q1 Tankan business survey and PMI report are due. The weaker JPY must have provided some gains to Japanese exporters and a further improvement in the Tankan is not out of the question.  Key figures coming up:

  • On Monday (03/29): Unemployment Rate (Feb) | Retail Sales (Feb)
  • On Wednesday (03/31): Industrial Production (Feb) | Construction Orders (Feb) | Housing Starts (Feb)
  • On Thursday (04/01): Tankan Survey (Q1) | Manufacturing PMI (Mar)

CAD

The Loonie depreciated 0.7% against the U.S. dollar over the last week after ongoing worries about a further reduction in oil demand due to the Covid-19 pandemic’s worsening situation, especially in Europe, pressured the oil prices. However, a ship stranded on the Suez Canal raised concerns about oil supply, which partially offset oil’s losses and provided some support to the CAD. On that note, the container ship was partially refloated this morning, which led oil prices to fall on the news, although there was no immediate clarity on the crucial question of when traffic in the canal will restart. On the economic calendar, GDP data on Wednesday will bring both the economic performance for January and producer prices for February, both are key drivers in the week. February’s Building permit numbers on Thursday should have a muted impact on the Canadian dollar ahead of Friday’s holiday. Key figures coming up:

  • On Tuesday (03/30): Payroll Employment, Earnings & Hrs
  • On Wednesday (03/31): GDP (Jan) | Industrial Prod. Prices (Feb) | Raw Materials (Feb)
  • On Thursday (04/01): Building Permits (Resid.) (Feb)
  • On Friday (04/02): Holiday – Good Friday

MXN

Last week, Mexico’s Central Bank (Banxico) left its benchmark interest rate unchanged at 4.0%, despite a weak economy. Accelerating inflation pressures were the main reason and the tone is cautious, with Banxico suggesting the door for more cuts is closed. It is a quiet and short week on the economic calendar. There are no material stats to be provided over the week, leaving geopolitics and Covid-19 in focus. Key figures coming up:

  • On Tuesday (03/30): Fiscal Balance (Feb)
  • On Thursday (04/01): Holiday – Maundy Thursday
  • On Friday (04/02): Holiday – Good Friday

CNY

Last week, mounting tensions between the West and China weighed on the Chinese Yuan and added pressure on the Chinese shares. The CNY dropped 0.55% against the greenback while stocks fell to near three-month lows. In the upcoming week, the market will continue to reflect the recent tit-for-tat sanctions, as well as the resurgence of Covid-19 cases in parts of Asia, which is an additional hurdle to a full Chinese economic recovery. On the economic calendar, Manufacturing PMI surveys will drive the attention and provide enough evidence to assess the global trade. Key figures coming up:

  • On Tuesday (03/30): NBS PMI Manufacturing and Non-manufacturing (Mar)
  • On Wednesday (03/31): Caixin Manufacturing PMI (Mar) 

BRL

On Sunday, a representative group of economists and businessmen published an open letter demanding more effectiveness in handling Covid-19 as the country registered 3,600 deaths on Friday and the infections numbers skyrocketed. Among several demands, the group asked for faster vaccination rollout and the national coordination of actions. In general, the slow pace of the vaccine rollout, a subpar recovery, and rising inflation rates will continue to weigh on the BRL in the following weeks. It is a busy week on the economic calendar front, with fresh inflation figures on Tuesday. On Wednesday, investors will receive a raft of data to assess the fiscal and monetary policy results. Manufacturing PMI for March on Thursday will end the week. Key figures coming up:

  • On Monday (03/29): BCB Focus Market Readout   
  • On Tuesday (03/30): IGP-M Inflation Index (Mar) | Producer Price Index (Feb)
  • On Wednesday (03/31): Unemployment Rate | Debt-to-GDP ratio (Feb) | Budget Balance (Feb)
  • On Thursday (04/01): Industrial Production (Feb) | Markit Manufacturing PMI (Mar) 
  • On Friday (04/02): Holiday - Good Friday

Quick Insights

USD: President Joe Biden’s infrastructure plan could cost north of $3 trillion

USD: President Joe Biden’s infrastructure plan could cost north of $3 trillion

EUR: The Manufacturing PMI report will be in focus on Thursday

EUR: The Manufacturing PMI report will be in focus on Thursday

GBP: Market players continue to see the U.K’s timeline to re-open the economy as realistic

GBP: Market players continue to see the U.K’s timeline to re-open the economy as realistic

JPY: The weaker JPY must have provided some gains to Japanese exporters

JPY: The weaker JPY must have provided some gains to Japanese exporters

CAD: The container ship was partially refloated this morning, which led the oil prices to fall on the news

CAD: The container ship was partially refloated this morning, which led the oil prices to fall on the news

MXN: Geopolitics and Covid-19 in focus

MXN: Geopolitics and Covid-19 in focus

CNY: The week ahead will bring material data to assess the global trade

CNY: The week ahead will bring material data to assess the global trade

BRL: Investors will receive a raft of data to assess the fiscal and monetary policy results

BRL: Investors will receive a raft of data to assess the fiscal and monetary policy results

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