Week Ahead: Geopolitics and NFP headline another busy week

Once again, it’s a big few days for markets with a major tariff headline in play on Tuesday, while top tier economic US data abounds, with ISMs and the monthly NFP report to round off the week. We also get another 25bps rate cut from the ECB at their rate decision meeting on Thursday, with hawks recently crowing about how much more policy easing is really needed. Of course, fallout from the Trump-Zelensky press conference debacle will grab the headlines, with market repercussions more long-term in nature. We err on the side of a modest rapprochement and would look through the more emotional media reports.

President Trump has moved the first tariff deadline date around, but at the time of writing, trade tariffs are set to start from 4 March and hit Canada, Mexico and China. As is increasingly normal with President Trump 2.0, a last-minute deal cannot be ruled out as talks between the parties are still ongoing.  But if fully enacted, economists reckon the measures could increase the effective trade-weighted tariff rate on all US imports close to 11%, which would be the highest level since WW2. That could lop off around 0.3% off US GDP, while US consumers may take the brunt of price increases, even though Trump says foreigners will pay due to a stronger dollar nullifying the impact on US prices.

The greenback rebounded last week after three straight weeks of losses. Important survey data in the week will inform on whether the fading of US exceptionalism has more legs. Friday’s jobs report could print lower than the 2024 average as corporate America becomes more cautious.  The ‘Trump Trade’ has been recalibrated in recent weeks with notably strong bearish momentum in bitcoin and Tesla. However, they are both oversold and recently hit their 200-day SMAs, so a correction might be in store.

In Brief: major data releases of the week

Tuesday, 4 March 2025

– Eurozone Inflation: Expectations are for the headline to print at 2.3% from 2.5% and the core to ease one-tenth to 2.6%. Services inflation and wage growth could be cooling, though energy prices keep the headline hot. EUR enjoyed February but struggled to break above the 1.05 resistance zone.

– US ISM Manufacturing: Consensus expects the February figure to dip modestly to 50.8 from 50.9. The prior print was a nine-month high, though the tone of the survey was less upbeat. Regional manufacturing surveys suggest a marginal slowdown.

Wednesday, 5 March 2025

– Australia GDP: Consensus sees growth ticking two-tenths higher to 0.5% in Q4. Easing inflation and tax cuts should help, so too public demand. The aussie suffered a bad week at the end of February as tariff threats ramped up and risk sentiment soured. Strong bearish momentum could see the low from October 2022 challenged at 0.6169.  

– US ISM Services: February non-manufacturing ISM is seen rising to 53.0 from 52.8. Services activity has remained in expansionary territory since July 2024. Other business surveys point to downside risks.

Thursday, 6 March 2025

– ECB Meeting: Markets fully expect another 25bps rate cut, which lowers the depo rate to 2.5%. Policymakers are fairly confident inflation will return to target over 2025, while growth concerns linger, especially with likely upcoming tariffs. Lower growth and higher near-term inflation is predicted in the new staff economic forecasts. 

Friday, 7 March 2025

– US NFP: Consensus sees 135k jobs added, down from the prior weather-related 143k. The average pace since the start of 2024 is 165k. The unemployment rate is predicted to remain steady at 4.0%. Wage growth is seen cooling at 0.3% m/m from 0.5%. Job cuts initiated by DOGE will take a few months to feed into the data.

– Canada Jobs: February jobs growth is expected to cool after January saw 76k jobs added. The unemployment rate ticked one-tenth lower to 6.6%. It’s near a coin flip for another 25bps rate cut at the BoC meeting next week. 

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