It may be a shortened trading week due to Easter Friday, but there is plenty crammed in to keep traders on their toes. The return of tier one US data means the focus turns back to CPI inflation where the headline rate is expected to move well above the 8% mark. We will also learn more about the outlook for the US consumer with both Retail Sales and Michigan Sentiment on the docket. There are also three major central banks updating monetary policy. Market participants will be keen to know the extent of hawkishness from the BoC, RBNZ and even the ECB.

Watch for: 

  • North America – US CPI, Retail Sales and Michigan Sentiment; along with the Bank of Canada (BoC)
  • Europe & Asia – The Reserve Bank of New Zealand (RBNZ) and European Central Bank (ECB); along with unemployment and CPI inflation for the UK.  
  • LatAm – Retail Sales for Brazil and Colombia 

North American data: 

  • US CPI (Tuesday 12th April, 1330BST) Headline CPI for March is expected to increase to 8.3% (from 7.9% in February), with core CPI increasing to 6.6% (from 6.4%).
  • US PPI (Wednesday 13th April, 1330BST) Forecasts suggest an increase to 11.0% on headline PPI in March (from 10.0% in February), with core PPI increasing to 8.8% (from 8.4%).
  • Bank of Canada monetary policy (Wednesday 13th April, 1500BST) Consensus is looking for a 50bps hike to 1.00% (from 0.50%)
  • US Retail Sales (Thursday 14th April, 1330BST) Core sales (ex-autos) are expected to have increased by +0.7% MoM in March (after a rise of +0.2% in February) 
  • Michigan Sentiment - prelim (Thursday 14th April, 1500BST) Prelim sentiment for April is expected to slip to 59.0 (down from a final 59.4 in March)
  • US Industrial Production (Friday 15th April, 1415BST) MoM production is expected to grow by +0.4% in March but the YoY growth is expected to fall to 5.9% (from 7.5% in February)

After steadying in the summer of 2021, US inflation has been rising steadily for the past six months. The headline US CPI rate for March is forecast to move decisively above 8% and is not expected to peak until the early summer at the earliest. Core inflation also looks on course to hit 7% in the coming months. The Fed is already on course to hike by 50bps at the next meeting, but higher than expected inflation could cement further subsequent aggressive hikes.

It is also a week of consumer data for the US. Retail Sales are expected to show monthly growth of +0.7%. However, this comes amidst a consistent deterioration in confidence indicators. The Michigan Sentiment is expected to deteriorate further, with both current conditions and expectation components also deteriorating. Traders will also be watching longer-term inflation expectations too.

University of Michigan Sentiment

The Bank of Canada is expected to hike interest rates by 50 basis points to 1.00% on Wednesday, effectively a pre-emptive shadow of what many believe the Fed will do. Market participants will be keen to hear the message for the pace of future hikes from Governor Macklem. 

Market Reaction: 

  • USD will be active throughout the week with several tier-one data points. Higher than expected CPI on Tuesday will be USD supportive, whilst reaction to retail sales tends to be a little shorter term. Michigan Sentiment will also be watched for any negative surprises, with attention too on consumer inflation expectations.
  • CAD will be reactive to how aggressive any forward guidance is from the Bank of Canada.

Europe & Asia: 

  • UK unemployment and wages (Tuesday 12th April, 0700BST) Unemployment is expected to fall to 3.8% in February (from 3.9% in January), with total Average Weekly Earnings expected to increase to 6.0% (from 4.8% in January).
  • German ZEW Economic Sentiment (Tuesday 12th April, 1000BST) Consensus is expecting a continued deterioration in sentiment to -50.0 in April (from -39.3 in March)
  • Reserve Bank of New Zealand monetary policy (Wednesday 13th April, 0300BST) A +25bps rate hike is expected to 1.25% (from 1.00% previously)
  • China Trade Balance (Wednesday 13th April, 0300BST) The overall surplus is expected to drop significantly to +$22.4bn (from +$116.0bn in February)
  • UK CPI (Wednesday 13th April, 0700BST) Inflation is expected to continue to rise with headline CPI increasing to 6.7% (from 6.2% in February) and core CPI up to 5.4% (from 5.2% in February)
  • Australia unemployment (Thursday 14th April, 0230BST) The headline rate is expected to fall to 3.9% in March (from 4.0% in February)
  • European Central Bank monetary policy (Thursday 14th April, 1245BST) No change is expected to the deposit rate of -0.50%.

UK inflation is expected to continue to rise. The Bank of England sees it hitting 8% in the coming months and some are suggesting as high as 10% could be seen. The forecast for UK CPI in March is for headline inflation to rise to 6.7% and up to 5.4% on a core basis. Given the high expectations for future months, there is an upside risk to these forecasts.

Major economy core Inflation

The ECB has an extremely difficult task on its hands (as all central banks do), trying to balance the risk of sharply rising (and higher than expected) inflation with the negative impact on growth. The hawks are gaining voice too on the Governing Council, with calls for one or even two rate hikes at least by the end of the year (with the deposit rate at least back to zero). For this meeting, we may see more decisive action. Ending the net asset purchases by Q3 may need to be dragged forward into Q2, whilst forward guidance may begin to signal higher rates in Q3/Q4.  

Market Reaction: 

  • UK traders will be watching inflation signals, with wage growth (as part of the labour market data) and CPI. Anything higher than forecast will support GBP
  • Expect EUR to be volatile around a crucial ECB meeting and press conference. Hints towards tighter monetary policy will be EUR supportive.
  • AUD will be supported by any signs of strength in the labour market data.

Latin America: 

  • Brazil Retail Sales (Wednesday 13th April, 1300BST) MoM sales are expected to grow by +0.5% in February with year on year sales improving slightly to -1.5% (from -1.9% in January)
  • Colombia Retail Sales (Wednesday 13th April, 1600BST) Year on year sales are expected to increase further to +21.5% in February (up from +20.9% in January)
  • Colombia Industrial Production (Wednesday 13th April, 1600BST) Year on year production is expected to increase to +16.3% in February (from +15.1% in January).

It looks to be a quiet week in Lat Am this week, with many countries celebrating Maundy Thursday and Good Friday for the Easter public holidays. However, there are some second-tier announcements to watch, with retail sales for Brazil and Colombia. Year on year sales is expected to post a fourth consecutive month of improvement in Brazil. Year on year data is still normalising from the huge base effects of Q2 2021. Colombia is set for another positive month of sales, to rise to a six month high.

LatAm currencies 3 month performance

Market Reaction

  • Lat Am currencies (specifically BRL and COP) will be impacted by retail sales data but the primary drivers will be broader market sentiment and whether the USD rally continues.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.