Global weekly: Ready for take-off

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The US labour market reported an impressive monthly gain, in line with the US Federal Reserve’s expectations. Now, financial markets have fully priced in a US rate hike in March.

Macro update

The US labour market continues to improve. February’s ADP job report showed that private employment increased by 298,000 up from an increase of 246,000 in January, one of the strongest monthly gains of the series since inception in 2001. Job gains in activities that previously showed a difficult recovery, have been picking up strongly. Goods-producing employment improved, mainly in construction and manufacturing. Stronger hiring is likely driven by increasing business confidence, particularly among small and medium-sized businesses.

February’s ISM manufacturing survey, an indicator of US economic conditions, recently published a slight slowdown in the employment component. Meanwhile, the ISM’s services survey showed that job creation edged up slightly compared with the previous month.

Thursday, the European Central Bank (ECB) left its monetary policy rates and plans for its asset-purchasing programme unchanged, as expected. At the press conference, ECB President Mario Draghi laid the groundwork for a shift in forward guidance. Overall, the press conference suggests that the ECB will embark on a gradual path towards the exit in the coming months. We expect tapering from April 2018 onwards at a pace of EUR 10 billion per month. That would see the programme coming to a halt in September of next year. We expect the first deposit rate hike in March 2019.

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