OUR SUMMARY
The upcoming week is poised to be a pivotal one for both the U.S. and Europe, with a heavy slate of economic data likely to shape near-term market sentiment. In the U.S., expectations are for a significant slowdown in growth, with Q1 GDP
forecast to decelerate sharply to 0.3% from 2.4% in Q4 2024. Labour market data due Friday is anticipated to show the addition of just 125,000 jobs in April, while the unemployment rate is likely to hold steady at 4.2%.
This slowdown coincides with forecasts that the ISM manufacturing index will signal further contraction, underscoring concerns about the underlying strength of the economy. Notably, comments from Federal Reserve officials last week suggested that if trade-related risks—particularly from potential new tariffs—begin
to weigh on employment, the Fed could consider rate cuts as soon as June. Markets, however, appear to be under pricing that possibility, making weaker-than-expected job data a potential trigger for dollar softness.
Across the Atlantic, Eurozone GDP is expected to post a modest 0.2% gain in Q1. While this would normally be seen as encouraging, investors may downplay any upside given the broader backdrop of geopolitical trade tensions, especially with the U.S. Inflation data in the region is also due, with headline inflation
projected to ease slightly in April, while core inflation is set to edge higher, keeping pressure on the ECB’s policy outlook.
Overall, the week ahead could recalibrate rate expectations and market positioning on both sides of the Atlantic, depending on how closely data aligns with—or deviates from—forecasts.
