RBC Capital Markets

Week ahead: The Riksbank and FOMC (see USD) policy meetings this week are widely expected to see policy held steady. The calendar also has Australia Q1 CPI (see AUD), China official PMIs (Friday), Canada February GDP (see CAD), and US personal income & spending (Friday), plus Q1 GDP reports from South Korea, Sweden, the US, and Taiwan. President Biden will address Congress for the first time on Wednesday, and he is expected to push his infrastructure spending plan.

USD: The FOMC meeting (Wednesday) is unlikely to introduce material changes. Still, some adjustments seem in order because of the strengthening economic backdrop, so saying something more than that indicators “have turned up recently” would certainly seem appropriate. We wouldn’t necessarily read into that more than what it is — a reasonable marking-to-market of where we are at the moment. As for the press conference, Powell’s tone is also unlikely to change much at this point. He recently said that the Fed is unlikely to start lifting rates before 2022. While we think that view will be challenged over the coming year, the Powell is likely to continue reiterating it this week.

EUR: We expect the April euro area 'flash' HICP data (Friday) to show headline inflation creeping up to 1.4% y/y from 1.3% y/y in March. As with last month’s data, this is almost entirely due to energy price base effects. Meanwhile, Q1 saw a further tightening in euro area lockdown restrictions, but the PMI surveys suggest that the euro area economy experienced a milder contraction than initially feared. We thus expect the Q1 GDP release (Friday) to show a fall of just 0.5% q/q.

SEK: The Riksbank meeting (Tuesday) and Sweden Q1 GDP (Thursday) are the highlights from Scandinavia this week.

AUD: We expect a decent lift in Q1 headline CPI (Wednesday) of 0.8% q/q, with fuel contributing about 0.3% to the overall number. This would raise the y/y pace to a still-lowly 1.3%, but a notable rise from 0.9% in Q4 2020. The big fiscal measures of 2020 have mostly washed through and should no longer cause large swings.

We expect the RBA’s preferred core inflation measures to average 0.45% q/q. The weekly payrolls (Wednesday) will deliver the first glimpse of how the labour market looks without JobKeeper. The end of this key wage subsidy program in March should see some labour shedding take place, though elevated job vacancy numbers indicate there will be plenty of hiring happening in the background. As an advance indicator for the more comprehensive monthly labour force survey, this will be a closely watched release.

CAD: RBC economics sees no reason to deviate from StatsCan’s +4.0% ‘flash’ estimate for February retail sales (Wednesday), following declines in December and January. February featured the beginning of re-openings following the second virus wave. While we expect another strong ‘flash’ estimate for March as re-openings continued, the focus has already turned to the third wave of cases/restrictions and its impact on April activity, with spending tracking ~1.5% lower in the first half of April. February GDP (Friday) is expected to increase by 0.5% m/m. A gain of about the same magnitude as February is likely for the expected March growth nowcast, as hours worked accelerated further in the month (+2%), alongside elevated housing starts and home re-sales.

Citi

Asia has seen a mostly positive start to the week, with the majority of currencies notching gains vs the USD. AUD is particular outperformer, with this potentially being attributable to commodity tailwinds. GBP and NZD have also performed well too, while in EM, KRW leads the pack in contrast to THB and TRY underperformance, again on familiar idiosyncratic factors outlined below.

Looking ahead, CitiFX Strategy remains constructive on risk and bearish the USD as outlined in the latest Monday Macro Fix with eyes in the near term on the April FOMC and President Biden’s American Families Plan speech, both on Wednesday. As for data today, we look to Germany IFO, USD durable goods orders and central bank speak in EUR. In EM, we await MXN economic activity, BRL current account data and UAH central bank minutes.

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