Weekly Market Outlook (April 15-19)

EVENTS TO COME:

• Monday: New Zealand Services PMI, Eurozone Industrial Production, US Retail Sales, NAHB US Housing Market Index, PBoC MLF.
• Tuesday: China industrial production and retail sales, UK labor market report, Eurozone ZEW, Canada CPI, US housing starts and building permits, US industrial production.
• Wednesday: New Zealand CPI, UK CPI.
• THURSDAY: Australian Labor 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%. Recent “activity” data has been pretty good, with the latest PMIs coming in strong. However, the CPI figures far exceeded expectations, as the deflationary threat remains present. PBoC Governor Pan said he still has sufficient room for monetary policy.adjustments to key rates cannot therefore be excluded.

U.S. M/M retail sales are expected at 0.3% vs. 0.6% previously, while non-auto M/M retail sales are expected at 0.4% vs. 0.3% previously. Retail sales are notoriously volatile, but the underlying trend shows stable spending and given the resilience of the labor market and the recent recovery in economic activity, we can expect this situation to continue. If we fail, the market should tone down the reaction, as the trend set by the third consecutive hot US CPI is unlikely to be changed by 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 on other figures. The main focus will be on wage growth indicators, but barring any big surprises, market prices are unlikely to change much. as market participants will be looking for the UK CPI report the next day.

There is no consensus on Canadian CPI numbers at the time of writing, but as always, The focus will be on underlying inflation measures, as this is what the Bank of Canada is most concerned about.. At its latest monetary policy meeting, the central bank removed a line from its statement where it previously expressed concerns about the inflation outlook. The move has been interpreted as a dovish move as it follows weak labor market and inflation reports. The market expects the Bank of Canada to cut rates in June, but the central bank will need the disinflationary trend to continue meeting expectations.

Wednesday

New Zealand’s one-year CPI is expected at 4.1%, up from 4.7%, while the Q/Q measure is forecast at 0.7%, up from 0.5%. At its latest monetary policy meeting, the RBNZ abandoned its tightening trend and said the OCR will need to remain at a restrictive level for an extended period of time. The central bank plans to normalize its policy only in 2025, while the market expects a first rate cut in August.. Barring any big surprises, the data is unlikely to change market prices much.

UK year-on-year CPI is expected at 3.1% versus 3.4% previously, while the M/M measure is forecast at 0.0.4% versus 0.6% previously. Core CPI Y/Y is expected at 4.3% versus 4.5% previously. The BoE is very concerned about the services inflation rate, which is sitting at an uncomfortable 6.1%, so this will be the most important data point.. There is basically a 50/50 chance of a rate cut in June and the BoE is unlikely to meet expectations unless we get a notable slowdown in inflation rates (particularly consumer inflation). services) in the coming months or the job market cracks. during this time.

THURSDAY

The Australian labor market report is expected to show 15.5K jobs created in March compared to 116.5K in February and an unemployment rate rising to 3.9% from 3.7% previously. Barring any big surprises, the data should not change much for the market with the first rate cut expected in November.

U.S. jobless claims continue to be one of the most important releases to follow each week because it is a more current indicator of the state of the job market. Indeed, disinflation reaching the Fed’s target is more likely with a weakened labor market. A resilient labor market, however, could make achieving this goal more difficult.
Initial claims continue to hover around cycle lows, while continuing claims remain firm around the 1,800,000 level. There is no consensus at the time of writing, although the previous week saw some initial claims at 211,000 versus 215,000 expected and continuing claims at 1,817,000 versus 1,800 expected.

Friday

Japan’s year-on-year core CPI is expected at 2.6% versus 2.8% previously with no consensus on other measures. The BoJ continues to support the status quo while mentioning that a further rate hike will depend on the data. The timing of such a move remains uncertain, however, with July and October on the table, although the latter is the most likely.. However, if we start to see an upward trend in inflation, the BoJ will likely act as early as July.