ECB continues to contradict market expectations with tightening messages

Chris Lagarde

Renta 4 : Today, on a day in which futures point to an opening with little change, the main macro reference will be the number of available job openings in the JOLTS (Job Openings and Labor Turnover Survey) in the US, which is expected to remain high in February (10.5 million expected as opposed to 10.824 million previously), giving signs of a still very solid labour market. This data will be the preview of tomorrow’s ADP private employment survey (210,000 expected versus 242,000 previously) and the official employment report to be published on Friday (240,000 expected versus 311,000 non-farm payrolls, unemployment rate stable at a record low of 3.6%, but with an expected moderation in wages to +4.3% versus +4.6% previously).

On the other hand, the most advanced indicators of the cycle, specifically the manufacturing ISM in the US, showed signs of deceleration yesterday, falling to 46.3, the lowest since May 2020, vs the expected stability vs the previous figure (47.7), although the moderation in prices paid is noteworthy on the positive side. Looking ahead to the rest of the week, we will see the tone of the services ISM, which together with this week’s employment data and next week’s CPI, and in a context of new pressures in the oil market (yesterday the price of Brent rose 6% to $85/b after OPEC’s surprise cut in supply), will determine whether or not the Fed will raise interest rates in May.

On the eurozone side, today producer prices are expected to continue to moderate in February, +13% expected versus +15.0% previously. However, inflation remains far from the ECB’s 2% target, and the most hawkish members (Holzmann of the Bank of Austria) are again talking about the need for further 50 bp hikes at the May meeting, as long as financial instability remains under control. These statements pushed the euro up to 1.09 against the dollar.

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