RBC Capital Markets

Week ahead: April CPI inflation data from the US, Germany, China, Sweden and India are in focus this week, though the German data will be the ‘final’ reading. The highlights of the week’s data calendar includes Germany ZEW survey, Australia budget (see AUD), UK Q1 GDP (see GBP), US CPI inflation (see USD), and US retail sales.

USD: We look for headline and core CPI inflation (Wednesday) to rise 0.3% and 0.4% m/m respectively. Easy year ago comparisons will again push the year-on-year rates quite a bit higher (i.e. headline 3.6% and core 2.4%). But we should not be so easily lulled by the base effects. The strength of month-on-month gains will dictate just how firm those y/y rates become, and that is a story about economic strength.

Meanwhile, it may be hard to fathom that after a near-10% gain in retail sales last month that another relatively strong outcome awaits us again on Friday, but we can tell that it was hard to tamp down the likely strength as we were putting together our estimate. While we may not achieve another near double digit gain in this report, an extremely solid near 2% m/m headline retail sales seems reasonable.

JPY: Japan current account balance and international securities transactions data (both Thursday) are on tap this week.

CNY: China CPI (Tuesday) and credit & aggregate financing data will be out this week.

GBP: The first estimate of UK Q1 GDP (Wednesday) should confirm that the winter lockdown had limited effects on the UK economy. The GDP data for January and February point to a less severe contraction in Q1 GDP than we had initially thought. Based on an expected 1.3% m/m GDP expansion in March as firms prepared for reopening, we now expect that GDP fell by 1.7% q/q in Q1. With the further reopening of the economy on April 12, the Q1 GDP report feels particularly backward-looking at this juncture.

NOK: Norway Q1 GDP (Wednesday) and Sweden CPI (Wednesday) are the highlights from Scandinavia.

AUD: A much stronger recovery in nominal GDP and the labour market, coupled with higher commodity prices notably iron ore, will deliver a markedly improved Australia Commonwealth Budget (Tuesday) compared to the December MYEFO forecasts. We expect an underlying budget deficit of –A$160bn in 2020-21 (vs MYEFO forecast of - A$197bn), and an improvement to around –A$90bn in 2021- 22 even with additional new expenditure.

Likely measures will be focused on a number of key areas including childcare, aged care, skills & education and green technology with an emphasis on job creation. The debt issuance target for the next FY will be released the following day with a sharply reduced nominal program of A$140bn.

Citi

Asia post Friday’s NFP miss has seen US yields continue to tick higher with 10y trading at 1.5950% again after Friday’s brief dip below 1.5%. It appears the market is continuing to internalise the beat in monthly AHE (0.7%MoM vs 0%e), which has bolstered short term inflation worries. This builds on recent bullish commodities price action and input price trends in ISM data. Consequently, we see the USD supported in parts, despite broader benign risk sentiment exhibited in equities. As a result, commodity currencies trade flat overnight, with EUR marginally lower. GBP is the outlier gaining 0.3% to 1.4020 currently after no SNP majority post elections.

Looking ahead NOK CPI and SEK Riskbank minutes are the main data points due in G10. We also see Fed’s Evans on the slate later in the day. EM has no data of note today.

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