Five fundamentals for the week: Top speeches and Core PCE stand out at quarter-end

Will Good Friday be good for the US Dollar? The Federal Reserve's favorite inflation measure and the bank's top person are both slated for that day despite thin liquidity. 

Here is an outlook for the top five events during the last week of the quarter.  

1) End-of-quarter flows may distort charts

Money managers adjust their portfolios at the end of the month, scrambling to meet their obligations. That triggers high volatility, which will be amplified by thin liquidity conditions on Friday, the last trading day of Q1. 

Moreover, Japan's fiscal year ends on the same day. While wage discussions are over and the Bank of Japan (BoJ) already lifted its interest rate, last-minute moves in that country tend to impact the entire world.

Many of the moves this week will have little technical or fundamental justification, especially on Friday. Things will return to normal next week. 

2) Fed hawk Waller may contradict Powell

Wednesday, 21:00 GMT. Christopher Waller is a Governor with the Federal Reserve, which means he is a permanent voter. He tends to be hawkish, erring on the side of crushing inflation over keeping the economy afloat. Most importantly, he tends to speak clearly, not hiding his opinions.

Is Waller aligned with Fed Chair Jerome Powell's dovish comments? Does he see higher inflation in January and February as "bumps in the road?" Or does he stick to his guns? His speech comes amid low liquidity after Wall Street closes. 

FXStreet's Fed Tracker is a new AI-based tool that analyzes speeches and sends a hawkish/dovish verdict. I expect Waller to show his hawkish side, boosting the US Dollar and hurting all other assets. However, if this hawk is relaxed about inflation, there would be a party in markets. 

3) US GDP and jobless claims to rattle traders going on vacation

Thursday, 12:30 GMT. On the last full day of trading for most of the world, the US releases the final estimate of the Gross Domestic Product (GDP) data for Q4 2023. While the data is outdated, any change in the headline and the deflator would move markets. 

Weekly US jobless claims are also of interest, especially if they jump above 220K or drop under 200K.

If these two releases beat estimates, the US Dollar would have room to rise, while Gold and stocks would likely slide. If both miss, the opposite would happen. 

4) Core PCE – How big is the bump?

Friday, 12:30 GMT. Fed Chair Jerome Powell said seasonal factors are behind higher inflation. That made sense in January, when some companies raise prices at the beginning of the new year. In February, the surprise was smaller, but still noteworthy.

However, these rises are more pronounced in the Consumer Price Index (CPI) release than the more moderate Personal Consumption Expenditure (PCE) Price Index. 

Finally, the Core PCE for February is here, and it will provide a better verdict on inflation. The economic calendar points to an increase of 0.3% MoM, below the 0.4% advance seen in January. A 0.2% read would provide a sigh of relief for markets, while a repeat of 0.4% would only help the US Dollar. 

This is a highly important data point, and the release on Good Friday, while Europe is on holiday, means erratic price action is likely. I expect 0.2% or 0.3%, as the overall trend in inflation is down. That would boost markets. 

5) Fed Chair Powell speaks

Friday, 15:30 GMT. Over a week after his press conference in Washington, the Fed Chair participates in a discussion in San Francisco. The conversation will be on Macroeconomics and Monetary Policy – so those not on holiday will be listening.

His speech comes hot on the heels of the PCE report, and his interpretation of the data could switch the narrative. A dovish comment on elevated figures would boost markets, while expressing caution in response to weaker inflation would dampen the mood. 

Powell speaks at the last hour of the quarter, which means even greater volatility. Trade with care.