USD: Data-heavy week shapes Fed view – TD Securities

TD Securities economists Oscar Munoz and Eli Nir anticipate a normalization in United States (US) labor data, with nonfarm payrolls at 80k, unemployment at 4.3% and modest wage growth. ISM Services Purchasing Managers' Index (PMI) is seen edging down, while JOLTS and Michigan sentiment soften only slightly. The Iran conflict and higher energy prices frame the macro backdrop, but recent Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data suggest enough resilience for the Fed to stay patient.

Labor, services and sentiment in focus

"We expect payrolls will show a normalization in job gains, ISM services to decline again, JOLTS to move lower, and UMich to rebound only slightly (in line with last week's consumer confidence)."

"We expect payrolls to show some signs of stabilization after three volatile months, with NFP likely increasing 80k owing to 85k private gains and 5k government job losses. Healthcare, leisure & hospitality, and trade, transportation & utilities will likely support most of the improvement. The UE [Unemployment] rate should continue showing stabilization at 4.3% as well — with participation moving sideways."

"We also expect AHE [Average Hourly Earnings] to stay modest at 0.2% m/m, with the y/y moving up to 3.7%."

"We expect the ISM services index to move sideways in April, edging down to 53.7 after unwinding February’s jump, with higher energy prices weighing more clearly on survey responses."

"Data last week showed a resilient economy that allows the Fed to be patient in assessing impacts from Iran. GDP in Q1 rebounded due to a reversal of the government shutdown and stronger underlying activity. Consumption did moderate though, with faster fixed investment largely supported by AI (Artificial intelligence)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)