US: Drivers for the week ahead – BBH

Analysts at BBH offer a sneak peek at what will be the key market-moving events from the US that will be closely eyed in the week ahead.

Key quotes

“The Fed Beige Book for the May 2-3 FOMC meeting will be released Wednesday.  Since the March 21-22 meeting, the data suggest that activity is slowing, the labor market is softening, and price pressures are easing.  Notably, supply chains continue to improve.  We believe the Beige Book will highlight these trends that support a pause after what is widely expected to be another 25 bp hike whilst leaving the door open for further tightening if needed.” 

“Fed tightening expectations have picked up bit.  WIRP suggests over 80% odds of 25 bp hike at the May 2-3 meeting, up from 70% at the start of last week and 50% at the start of the week before that.  After that, it’s all about the cuts.  However, only one cut is priced in by year-end vs. two at the start of last week.  In that regard, Powell has said that Fed officials “just don’t see” any rate cuts this year.“

“S&P Global preliminary April PMI readings Friday will be a data highlight.  Manufacturing is expected at 49.0 vs. 49.2 in March, services is expected at 51.5 vs. 52.6 in March, and the composite is expected at 51.2 vs. 52.3 in March.  If so, this would suggest that the U.S. economy is still expanding as Q2 gets under way but at a slower pace than what was seen at the end of Q1.  Of note, the Atlanta Fed’s GDPNow model is currently tracking Q1 growth at 2.5% SAAR, up from 2.2% previously.  Next model update will come Tuesday.”

“Housing data are expected to show continued weakness.  April NAHB housing market index will be reported Monday and is expected at 45 vs. 44 in March.  March building permits and housing starts will be reported Tuesday and are expected at -6.5% m/m and -3.5% m/m, respectively.  March existing home sales will be reported Thursday and are expected at -1.8% m/m vs. 14.5% in February.”