Following the Easter weekend, the week's data docket as well as the Fed speak calendar are relatively light. Most of the data releases this week refer to March, before the April 2nd tariff announcements, their subsequent modifications, and the resultant market volatility. As such, these releases are somewhat stale. In US macro data, we have new home sales, S&P PMIs and Fed's beige book. On tariff front, we can expect some calmness this week amidst ongoing US negotiations with major trade partners. Fed speak has been relatively hawkish and they can afford to do so till hard data turns worse. Volatility & uncertainty are the worst enemies of consumer confidence & business investment decision making. We believe the level of flip flops we have seen in recent US policy making almost makes recession a certainty by Q4CY25. While core PCE might remain elevated at 3.5% by Dec’25, if unemployment rate shoots up to 4.8% by Dec’25, the employment mandate of Fed might take priority over the inflation mandate. Hence, we continue to expect 3 rate cuts of 25 bps each in REMCY25. In UST auction supply, we have 69 BN USD supply of 2yrs, 70 BN USD supply of 5 yrs & 44 BN USD supply of 7yrs. In RoW data, ECB last week did a dovish 25 bps cut but we still believe terminal rate is 2% because there is still 3 months for EU to negotiate with US. In European data, we have flash PMIs & German IFO survey. In Asia, we have Tokyo core CPI coming hot this Friday at 3.2%. We expect BOJ to stand pat at its next meeting on April 30-May 1. But our base case is that heated inflation will prompt it to raise its target rate by 25 bps to 0.75% at the July 30-31 meeting. In China, we expect banks to cut prime lending rates by 10 bps for both 1yr and 5 yr tenures.
