Key economic events this week include U.S. inflation, jobs data, and trade risks, with Trump’s tariffs potentially impacting global markets. The UK’s CPI and budget statement may test sterling, while eurozone inflation could push the ECB toward a rate cut. In Asia, Japan’s Tankan survey and Australia’s RBA decision will shape market sentiment.
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Key Points to Watch Out For:
- Trump’s reciprocal tariffs could trigger more turmoil
- The U.S. jobs report could reflect the effect of DOGE on the labor market
- Eurozone inflation will be key to ECB bets as an April cut remains a wildcard
RBA likely to hold rates; Canada jobs data and Bank of Japan Tankan survey also eyed
Markets on Edge Ahead of Tariff Deadline
As Wednesday, April 2 approaches, markets are torn between optimism and anxiety ahead of the Trump administration’s anticipated announcement of reciprocal tariffs. The White House is expected to address countries with the largest trade imbalances with the U.S.—a group that reportedly accounts for 15% of U.S. trading partners. This group, dubbed the “dirty 15,” includes China, the EU, Mexico, South Korea, and others.
Ongoing negotiations with several countries could lead to a more moderate outcome. If President Trump adopts a softer approach, markets could breathe a sigh of relief. However, if the announcement lacks sufficient exemptions, Wall Street could experience renewed selling pressure. There is also speculation that the new tariffs could be extended to specific sectors such as pharmaceuticals, which would further reduce risk appetite.
The NFP Report Could Fuel Recession Concerns
Although the U.S. economy has so far withstood the turbulence of the Trump administration’s policies, the non-farm payrolls (NFP) report on Friday, April 4, could change that narrative. Since its formation following Trump’s election, the Department of Government Efficiency (DOGE) has been laying off federal workers—a trend expected to begin appearing in the March employment figures.
Compounding concerns, private companies, especially manufacturers, are becoming more cautious about hiring, uneasy about the unpredictability of trade policy. Federal Reserve Chairman Jerome Powell argues that the labor market remains “in balance,” but the risks are skewed to the downside. After an increase of 151,000 jobs in February, forecasts point to a slower gain of 128,000 in March.
Investors will closely follow both public and private payroll data to assess the magnitude of government layoffs and whether the private sector can compensate for them. The unemployment rate is expected to rise to 4.2%, while average hourly earnings are projected to increase by 0.3% month-on-month.
A significant slowdown in the labor market could reinforce expectations of a rate cut by the Federal Reserve. Although the Fed is still on hold, further signs of weakness could push it to act.
Will the Economic Data Sustain the Dollar’s Rally?
The dollar has been regaining ground, but this recovery could be affected by upcoming economic releases. The ISM Manufacturing PMI (due Tuesday, April 1) is expected to remain stable at 50.3, while the ISM Services PMI (Thursday, April 3) is forecast to dip slightly from 53.5 to 53.0.
Other key releases include the Chicago PMI (Monday, March 31), JOLTS job openings (Tuesday), the ADP employment report and factory orders (Wednesday), and Challenger layoffs (Thursday). If these indicators suggest a weakening economy, the dollar may face renewed selling pressure—especially if markets begin pricing in a third rate cut by the Federal Reserve this year.
Worse still, if the data reveals weak growth alongside an increase in ISM price indices, fears of stagflation could grow. In such a scenario, expectations of rate cuts may offer limited support to equities.
Eurozone CPI and Tariffs Increase the Odds of an ECB Rate Cut
The European Central Bank has hinted that it will avoid cutting rates in April, but recent developments may force its hand. The U.S. is set to impose 25% tariffs on all car imports, including spare parts, starting Wednesday, April 2. This move poses a serious threat to the eurozone, which is heavily reliant on car exports.
Investors now see a roughly 90% probability that the ECB will cut interest rates by 25 basis points at its April 17 meeting. If preliminary March CPI data—due Tuesday—confirms another drop in inflation, the euro could weaken further. Headline CPI fell to 2.3% in February, and core inflation has also moderated. However, if inflation picks up, the euro may find some relief as the probability of rate cuts diminishes.
The minutes of the ECB’s March meeting, to be released Thursday, April 3, could shed further light on the central bank’s next steps.
RBA Expected to Hold Rates in the Face of Trade War Pressures
The Reserve Bank of Australia (RBA) is expected to keep rates unchanged at its next meeting. After lowering the official interest rate in February, the central bank is not expected to act again until July. However, escalating trade tensions—particularly with China, Australia’s largest trading partner—could prompt earlier intervention.
Adding to the dovish outlook, February inflation data was weaker than expected, and employment figures unexpectedly declined. If the RBA signals openness to a rate cut in May, the Australian dollar could reverse course, although it has so far remained above its short-term uptrend.
China PMI data—an important driver of the Australian dollar—will also be in focus. The government’s Manufacturing PMI will be released Monday, March 31, followed by the S&P Global/Caixin PMI on Tuesday, April 1. Positive surprises could lend support to the currency.
Bank of Canada Faces Challenges as Tariff Risks Increase
The Canadian dollar has remained relatively stable despite its exposure to U.S. tariffs. The Bank of Canada (BoC) recently cut rates by 25 basis points, citing trade-related risks. However, Governor Tiff Macklem also acknowledged rising inflationary pressures, which may limit further easing.
Markets are currently pricing in two more rate cuts this year, although those expectations could rise if the economy deteriorates. Friday’s employment data (April 4) will be key to assessing the health of Canada’s labor market.
Conclusion
Despite growing trade tensions, the Japanese yen has not experienced its typical safe-haven demand. Investors are increasingly concerned that Trump’s reciprocal tariffs could weigh on Japan’s growth, making a Bank of Japan (BoJ) rate hike this year unlikely.
The BoJ’s Tankan business sentiment survey—due Tuesday—will provide insight into how trade issues are affecting corporate confidence and investment plans. Also in focus are preliminary industrial production figures (Tuesday, April 1) and household spending data (Friday, April 4).
If the data shows resilience, the yen could stabilize. But if the economic consequences appear severe, the currency may remain under pressure.
