Following another historically volatile week for markets, investors will have to process a large dose of Fed speak, most notably Chair Powell's speech on Wednesday at the Economic Club of Chicago, as well as a collection of US economic data before they are able to leave for the long Easter weekend (bond markets have an early close on Thursday while both bond and equity markets are closed on Friday for the Good Friday holiday). After the lower than expected core CPI & core PPIs, we have lowered our expectation of core PCE to 0.06% MoM for the March'25 reading due for release on 30th April. In other US macro data, we expect headline retail sales to to jump to 1.4% m-o-m in March from 0.2% in February, driven by a sharp increase in vehicle sales in the month. We expect the nominal control retail sales growth to slow to 0.5% m-o-m from 1.0% in February. The short week ahead might be watched for 10yr UST yields. We believe the pain threshold for Fed is some where around 4.85-5% levels on 10yr USTs. Around these levels, we can expect either QE or SLR relief measures. Even Trump may tout major developments in trade negotiations as a face-saving device to lower tariffs on certain countries. In RoW events, we expect another 25 bps cut by ECB in it's 17th April meeting. In our view, US tariffs – whether 10% or 20% – will have a noticeable impact on European growth, and we believe the hit to growth will dominate the ECB’s thinking. With energy prices low, ECB is likely to cut in June too by another 25 bps to end it's current rate cutting cycle with terminal rates at 2%. Wednesday's BOC meeting is very much live. We believe that the 28% market pricing of 25 bps cut is too low considering we will get to know the CPI figure on Tuesday itself. Any reading less than 0.5% implies a 25 bps cut on Wednesday. In UST auction supply, we have 25 BN USD supply in 5 year TIPS & 13 BN USD supply in 20yr USTs.
