UPCOMING EVENTS:
- Monday: New Zealand Services PMI, Eurozone Industrial Production, US Retail Sales, US NAHB Housing Market Index, PBoC MLF.
- Tuesday: China Industrial Production and Retail Sales, UK Labour Market report, Eurozone ZEW, Canada CPI, US Housing Starts and Building Permits, US Industrial Production.
- Wednesday: New Zealand CPI, UK CPI.
- Thursday: Australia Labour Market report, US Jobless Claims.
- Friday: Japan CPI, UK Retail Sales.
Monday
The PBoC is expected to keep the MLF rate unchanged at 2.50%. The recent “activity” data has been pretty good with the latest PMIs coming in strong. The CPI figures though missed expectations by a big margin as the deflationary threat remains present. The PBoC Governor Pan stated that they still have sufficient room for monetary policy, so adjustments to the policy rates cannot be ruled out.
The US Retail Sales M/M is expected at 0.3% vs. 0.6% prior, while the Retail Sales ex-Autos M/M figure is seen at 0.4% vs. 0.3% prior. Retail Sales are notoriously volatile, but the underlying trend shows stable spending and given the resilience in the labour market and the recent pickup in economic activity we can expect it to continue. If we get a miss, the market should fade the reaction as the trend set by the third consecutive hot US CPI is unlikely to change by the Retail Sales data.
Tuesday
The UK Unemployment Rate is expected to remain unchanged at 3.9% and there is no consensus at the time of writing for the other figures. The focus will be mainly on wage growth metrics but unless we get some big surprises, the market’s pricing is unlikely to change much as market participants will be looking for the UK CPI report the next day.
There is no consensus for the Canadian CPI readings at the time of writing but as always, the attention will be on the underlying inflation measures as that’s what the BoC is most concerned about. The central bank at its latest monetary policy meeting removed a line in the statement where it previously noted its concern about the inflation outlook. This was interpreted as a dovish move as it followed weak labour market and inflation reports. The market sees the BoC cutting rates in June, but the central bank will need the disinflationary trend to continue to deliver on expectations.
Wednesday
The New Zealand CPI Y/Y is expected at 4.1% vs. 4.7%, while the Q/Q measure is seen at 0.7% vs. 0.5% prior. The RBNZ at its latest monetary policy meeting dropped the tightening bias and stated that the OCR will need to remain at a restrictive level for a sustained period of time. The central bank expects to normalise policy only in 2025 while the market sees the first rate cut in August. Unless we get big surprises, the data is unlikely to change the market’s pricing much.
The UK CPI Y/Y is expected at 3.1% vs. 3.4% prior, while the M/M measure is seen at 0.0.4% vs. 0.6% prior. The Core CPI Y/Y is expected at 4.3% vs. 4.5% prior. The BoE is very concerned about the Services Inflation rate which stands at an uncomfortable 6.1% level, so that will be the most important data point. There’s basically a 50/50 chance for a rate cut in June and it’s unlikely that the BoE will deliver on expectations unless we get some notable easing in the inflation rates (especially services inflation) in the next couple of months or the labour market cracks in the meantime.
Thursday
The Australian Labour Market report is expected to show 15.5K jobs added in March vs. 116.5K in February and the Unemployment Rate to tick higher to 3.9% vs. 3.7% prior. Unless there are big surprises, the data is unlikely to change much for the market with the first rate cut expected in November.
The US Jobless Claims continue to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market. This is because disinflation to the Fed's target is more likely with a weakening labour market. A resilient labour market though could make the achievement of the target more difficult. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around the 1800K level. There is no consensus at the time of writing although the prior week saw Initial Claims at 211K vs. 215K expected and Continuing Claims at 1817K vs. 1800 expected.
Friday
The Japanese Core CPI Y/Y is expected at 2.6% vs. 2.8% prior with no consensus of the other measures. The BoJ continues to support the status quo while mentioning that another rate hike will depend on the data. The timing for such a move remains uncertain though with July and October being on the table, although the latter is the most probable one. Nevertheless, if we start to see inflation trending upwards, the BoJ will likely move already in July.
