Upcoming Week: Private Sector PMIs, Federal Reserve Minutes, and Employment Report

The first week of the year is crucial for global financial markets, with economic indicators influencing expectations regarding potential rate cuts in the first quarter of 2024.  

Highlights

• The FOMC Meeting Minutes, the US Jobs Report, and the ISM Non-Manufacturing PMI will impact expectations for a Q1 2024 Fed rate cut.
• Euro area inflation data and private sector PMI statistics may influence the ECB's position on interest rates.
• China's private sector PMI figures are expected to impact market risk sentiment.  

The US Dollar

In the first half of the week, investor focus will be on the US manufacturing sector, with attention on S&P Global US Manufacturing PMI and ISM Manufacturing PMI reports. A significant contraction in this sector could fuel expectations of a Q1 2024 Fed rate cut. Midweek, investor attention will shift to the US JOLTS Job Openings Report and FOMC Meeting Minutes, with job openings data potentially influencing Fed rate cut expectations. The latter will reveal the Fed's disposition towards rate cuts in the first quarter. In the latter half of the week, the spotlight will be on the services sector and labor market, particularly the ISM Non-Manufacturing PMI and US Jobs Report. Weaker performance in these areas would support predictions of a Q1 2024 Fed rate cut.

The EUR

Manufacturing PMIs for euro area member states and the Eurozone on Tuesday will impact the EUR/USD, potentially affecting expectations of a euro area recession. German unemployment figures on Wednesday will also be significant, potentially impacting consumer spending and inflation. On Thursday, French and German inflation numbers and Eurozone services PMIs will be of interest, with inflationary pressure and service sector activity aligning with recent ECB commentary. Eurozone inflation and German retail sales figures will conclude a busy week for the European markets.

The Pound

UK manufacturing and services PMI numbers will influence demand for the Pound, with services PMI drawing more interest due to its larger contribution to the UK economy. Sub-components like prices, employment, and new orders will also be important. On Friday, focus will be on the UK housing sector and construction PMI numbers, with improved data potentially easing concerns of a UK economic recession.

The Loonie

Buyer demand for the Loonie will be driven by employment figures and Ivey PMI numbers for December. Economic indicators from China and crude oil inventory numbers will also be relevant.

The Australian Dollar

The RBA's interest rate decision will be crucial for the Australian Dollar, with economic indicators from China also warranting attention. Private sector PMI numbers from China will influence market risk sentiment.

The Kiwi Dollar

There are no economic indicators affecting investor appetite for the Kiwi dollar, but private-sector PMI numbers from China are worthy of attention.

The Japanese Yen

Attention will be on the Services PMI for December, with Bank of Japan commentary also important for the Japanese Yen.

China

Private sector PMI numbers from China will have an impact on market risk sentiment in the first week of 2024, with the potential for a slowdown in private sector activity raising concerns about the global economic outlook.