Emerging Markets | Europe | FX | Rates | US
Key Events: Will a Dovish BoE Open the Way to Cuts?
- By Macro Hive
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Key Events
G10
In the US, there are two main events:
- Senior Loan Officer Opinion Survey on Bank Lending Practices (Monday): We expect it will still show increased credit demand, fewer banks tightening standards, and more banks willing to extend loans – another sign Fed tightening is not reaching the economy.
- U. Mich. Consumer confidence (Friday): Consensus expects no change. We agree based on inflation stickiness (the survey tends to reflect HH inflation perceptions). We expect little change in short- and long-term inflation expectations, with the latter stable but higher than pre-pandemic.
Elsewhere in G10:
- Norway CPI (Friday): Norway and Swedish central bank expectations have diverged aggressively; core CPI outturns are one reason. Consensus expects a slight miss (10pp) versus Norges Bank forecasts.
EM
- Chinese data: China is back after week-long holidays, during which JPY rose sharply on intervention. So watch:
- USD/CNY FX fix (Monday): (follow BoJ’s lead in reversing trend?).
- Trade data (Thursday): Market expects +1.5% YoY – not great after the big miss in March. If slowdown is confirmed, it raises odds of FX devaluation and pivot to fiscal easing.
- Aggregate Financing data (no date): The credit impulse has become a worse predictor of the Chinese economy, but mid- to long-term lending to households could infer a trend in mortgage refinancing.
- CPI & PPI (Friday): We see upside risk to PPI (consensus –2.3% YoY) on the large rise in oil and metal prices.
- Korea March BoP (Wednesday): KRW already looks too weak relative to Jan-Feb BoP. If the basic balance held up in March, it would confirm KRW undervaluation, and we would shift our stance to bullish.
- Hungary CPI inching higher (Friday): Rising fuel prices, earlier forint weakness and risks from food prices mean another elevated MoM CPI print in April. YoY to remain broadly unchanged until May.
Central Banks in Action
- Dovish BoE should open way for cutting (Thursday): We expect the BoE to leave rates unchanged at next week’s meeting. However, a more dovish inflation forecast should open the door to explicitly discussing rate cuts.
- RBA forced to sound hawkish (Tuesday): Previous meetings saw markets ignore RBA caution that they may have to hike again. Now it is being priced (wrongly, relative to other central banks). The RBA will likely stay cautious in both directions. A dovish upset will likely come 16 May in the April labour force survey.
- Riksbank (Wednesday): Analysts are split. Board members had hinted at May, but displeasure over SEK developments means we expect June.
- BNM on hold at 3% (Thursday): Expect a hold at 3%. Some see a small chance they hike 25bps to support MYR, but it is very unlikely.
- BCB to cut only 25bps (Wednesday): March guidance was -50bps, but Neto’s rhetoric since suggests a slower path. They may cut 50bps and indicate going on hold.
- NBP on hold (Thursday): Inflation rising in April will cement the NBP’s hawkish resolve. Rates are set to remain at 5.75% for the rest of the year.
- Banxico to skip cut (Thursday): A cautious stance due to US rates pressure will keep Banxico on hold, indicating a data dependent path. Voting split: we expect 5-0 or 4-1 split (in favour of cut).
- Five Fed speakers, including Williams (Monday): They are likely to socialize the latest FOMC’s key message: the Fed is on hold until it feels more confident on inflation trends but is not changing its policy outlook.
Markets to Watch
- US Rates: We remain bearish on 10s and 30s Treasury yields with the view they could reach October’s highs. We still think any rally should be faded. To cover for possible weakness in the data, the number of cuts priced in by 2025 is reasonably attractive.
- G10 FX: Extreme bearish changes to G10 FX positioning across asset managers, leveraged funds, and options markets has left the market cautious. Previous instances saw GBP, AUD and NZD outperform in the following month, while EUR underperformed.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)