Last week, Canada, New Zealand, the UK, the Eurozone and Japan, all released inflation figures. The general trajectory was flat to moving lower (Canadian inflation ticked up to 2.9% Y.o.Y for March) but there was much to allow a little self-congratulatory back-patting among Central Bankers and enthusiasm that it’s a job well done, that tight monetary policy is working and that we should soon see the start of an interest rate easing cycle.
So far, the Swiss National Bank has cut interest rates to 1.5%, but Swiss inflation is running at 1.2% (unlike everywhere else in G7 where headline inflation is running in the high twos to 3 and 4%). Who will cut next? My money is on either the UK or Eurozone.
As we can see, inflation is trending lower in both areas. April’s prints will be interesting. Theoretically, if the trend continues, we may be looking at rate cuts in June, which would politically coincide very nicely for the current UK government.
What about the US? This week we have the Fed’s preferred measure of inflation- PCE numbers- out on Friday. Other than that, in a relatively quiet week for data; Australia releases quarterly inflation figures, the US releases Durable Goods data and GDP, the Bank of Japan announces its interest rate decision, and the University of Michigan releases its Consumer Sentiment Index.
On Wednesday Australian inflation is largely expected to follow the global trend and show a fall to 3.4% or lower Y.o.Y for the quarter. US Durable Goods are expected to rise to 2.5% for the month of March. On Thursday US Q1 GDP is likely to fall to 2.5%.
Friday early and the BOJ is expected to keep Japanese interest rates at 0%. US Core PCE and the PCE Price Index are both forecast to print 2.6% for the month of March. Michigan Consumer Sentiment is likely to drop to 77.8 from 79.4 for the month of April.
Good Luck and Good trading!
Ben Robson is Head of Institutional E-FX at Swiss Finance Corporation. He is also the Amazon Best Selling Author of Currency Kings – How Billion traders Made their Fortune Trading Forex. McGraw Hill 2017
