Weekly Market Outlook: US labor market data and Eurozone PMI

U.S. wages forecast to rise in December 2018

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The markets head into a busy week with a lot of incoming data covering the month of December. It is particularly busy for the USD where the week ahead will see economic reports covering the labor market and business activity as measured by the ISM.

In the Eurozone, the final PMIs for manufacturing and services sector will be coming up followed by the flash inflation estimates for January. The PMIs will shed light on how the Eurozone’s economy fared for the month of December and could give glimpses into how the fourth quarter GDP fared in the economic bloc.

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The markets for the rest of the currencies are relatively quiet. Here’s a quick recap of the main economic events due next week.

December jobs report and ISM PMI to keep the USD busy

Economic data from the U.S. will see the release of the monthly jobs report this week. Coming up ahead will be the ADP/Moody’s payrolls report in the middle of the week. This is later followed up by the official payrolls report due on Friday. The jobs report covers the data for the month of December. The payroll figures come as the Federal Reserve looks to a new year with a forecast of two rate hikes. However, any rate hike decision is likely to come only during the March FOMC meeting.

Besides the payrolls data, other economic reports over the week include the manufacturing and non-manufacturing PMI reports from the U.S. Institute of Supply Management.

Manufacturing PMI from ISM is expected to ease after the index rose to 59.3 in November. Recent forward-looking regional manufacturing indexes have all pointed to a slowdown which could impact the ISM’s report.

Services or non-manufacturing PMI has been hovering near the 60 level for the past three months. The data indicated a strong performance in the services sector.

Both the manufacturing and non-manufacturing PMIs will give an early glimpse into the U.S. economy for the month of December and thus for the fourth quarter of the year.

Economists are already forecasting that the U.S. economy might have slowed in the fourth quarter of the year.

Eurozone PMIs to signal the state of business activity

Data from the Eurozone this week is relatively quiet save for the manufacturing and services PMI for the Eurozone and some of the major economies.

The data covers the month of December and preliminary PMI reports indicated muted growth for the most part. An unchanged PMI on both the services and manufacturing activity for December could potentially signal subdued pace of economic growth for the Eurozone.

The data comes as the ECB has ended its QE program in December. Investors remain cautious as growth in the Eurozone has slowed significantly this year. Besides the PMI report, the flash inflation estimates for January will also be out this week.

Headline inflation has remained around the ECB’s 2.0% inflation target for the most part. However, core inflation is still a far way off from the 2% inflation target rate. This signifies the weakness in underlying inflation pressures.

A slowdown in consumer prices could keep investors on the edge and potentially push back expectations of a rate hike from the ECB. The European Central Bank signaled that it would look into hiking rates only during the second half of the year.


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