A busy week with US jobs data and Eurozone inflation in focus

Market volatility continues this week, exacerbated by tensions between Ukraine and Russia, the world's second-largest crude exporter, and COVID-related lockdowns in China, the largest crude importer. US jobs data for March is due on Friday, and it will be closely watched, as it is the last monthly report before the May Federal Reserve meeting. The US PCE index will also be released as part of an active week on the economic calendar. Meanwhile, the outlook for the markets will also be affected by developments in Ukraine and oil prices.

Oil prices fall on Shanghai's lockdown

Early Monday, oil prices fell more than $ 5. In China, Shanghai's new quarantine in response to the Covid-19 outbreak has raised concerns about declining fuel demand and boosted sell-off among disappointed investors who expected such a quarantine not to happen.

PCE index is expected to grow

In the year to January, the PCE index rose by 6.1% compared to December's 5.8%. As for core PCE - excluding food and energy costs - gained by 5.2%. Inflation is expected to rise further this week, with the PCE index rising by 6.4% and core PCE hitting 5.5%. This can raise the likelihood of an aggressive rate hike in May.

US jobs data

In addition, the last jobs report showed a decline in unemployment to 3.8%, while the labour force participation rate rose marginally to 62.3%. This is the highest level since March 2020, when the figure was 62.7%. The current trend must continue to markets get back to the pre-pandemic level of 63.4% seen in February 2020.

The March payrolls report is expected to reflect another strong month in terms of hiring. Unfilled jobs remain high with over 10 million, while weekly jobless claims are close to 50-year lows. ADP is reportedly expecting to report an increase of 400,000 jobs in March, while estimates suggest 450,000 nonfarm payrolls were created in March. The unemployment rate is predicted to fall to 3.7%, and hourly wages will likely grow to 5.5%.

Eurozone flash CPI

EU CPI estimates suggest a new record high of 6.3% in March as input prices rose across the bloc and more than 25% in Germany and Italy. It is forecast that the core CPI will rise to 3.1%. The ECB will find it increasingly difficult to resist calls for interest rate hikes this year. Still, any increase would impact more indebted EU members such as Italy. ECB's narrative that interest rates are not at risk will be tested this week when the first estimates of eurozone inflation for March are released. The inflation rate has reached a record high of 5.9% and is expected to rise to 7% in the coming months. It is not surprising that some officials are pushing for one rate move or even two this year, given the ECB's 2% target.