Fed and BoE meetings coupled with employment data from Canada and New Zealand as well as ISM services PMI will highlight the week ahead of us.
USD
Treasury expects to borrow $514bn in Q2 with assumption for an end-of-June cash balance of $850bn. The borrowing estimate is $391bn higher than announced in February 2025, primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows. For the Q3 Treasury expects to borrow $554bn with assumption for an end-of-September cash balance of $850bn. QRA showed unchanged issuance from the first quarter.
United States and Ukraine signed an agreement on Wednesday to establish United States-Ukraine reconstruction investment fund. “Treasury Department and the U.S. International Development Finance Corporation (DFC) will work together with the Government of Ukraine to finalize program governance and advance this important partnership. “
Advanced reading of Q1 GDP printed -0.3% vs 0.3% annualized as expected. Consumer spending has plunged to 1.8% from 4% in the previous quarter and contributed just 1.21pp to the overall reading. The biggest detractor from the GDP was, of course, net trade which took away 4.83pp as imports surged 41.3% during the quarter in order to avoid tariffs. Government spending also negatively contributed to the GDP as it detracted 0.25pp. Additionally, PCE price index jumped to 3.6% from 2.4% in the previous quarter indicating that inflation remains sticky.
March PCE report saw headline number drop to 2.3% y/y from 2.5% y/y in February with monthly inflation coming in flat and even in deflation when unrounded (-0.04%). Core reading printed 2.6% y/y as expected and came down from upwardly revised figure of 3% y/y. Monthly figure also printed flat with unrounded number at 0.028%. Services inflation increased 0.15% m/m, lower than 2% target if annualized, while services ex shelter came down to 3% y/y from 3.4% y/y seen in February. Fed will be very happy with these data points.
ISM manufacturing PMI for the month of April slipped further into contraction with a 48.7 reading vs 49 in March thus beating expectations of 48. Improvements were seen in new orders and employment indexes with prices index also ticking up, but that is not a good sign as it shows sticky inflationary pressures. On the other hand, production and new export orders plunged with backlog of orders also showing decline.
April employment report saw headline NFP number at 177k vs 130k as expected. The unemployment rate remained at 4.2% while participation rate ticked higher to 62.6% from 62.5% in March. Undermployment rate (U6) ticked down to 7.8%. Average hourly earnings cooled as they came in at 0.2% m/m and 3.8% y/y vs 0.3% m/m and 3.9% y/y as expected. Average weekly hours ticked up though to 34.3 from 34.2 the previous month. Government added only 10k jobs while the rest (167k) were private payrolls. There was also a surge in full-time jobs which rose by 305k. Healthcare continued to add jobs with 51k jobs added followed by transportation and warehousing with 29k jobs. Leisure and hospitality saw almost no change to jobs. This report shows no worrying signs for the labor market and odds of a June cut are diminishing.
The yield on a 10y Treasury started the week at 4.24%, rose to 4.33% and finished the week at around that level. The yield on 2y Treasury started the week at 3.74%, rose to 3.83% and finished the week at around that level. Spread between 2y and 10y Treasuries started the week at 50bp and finished the week at 50bp. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 2%, while probability of a no cuts is around 98%. Chances of a June rate cut fell below 50% after NFP.
This week we will have ISM service PMI and Fed meeting. No change is expected at this meeting but we should be getting some clearer hints about potential June cut.
Important news for USD:
Monday:
ISM Services PMI
Wednesday:
Fed Interest Rate Decision
EUR
Preliminary Q1 reading of Eurozone GDP came in at 0.4% q/q and 1.2% y/y vs 0.2% q/q and 1.1% y/y as expected. French Q1 GDP saw it improve to 0.1% q/q from -0.1% q/q in Q4 of 2024. The details are not encouraging as they showed no contribution from consumption and a big drop in exports. Changes in inventory managed to propel GDP into positive category. German GDP grew by 0.2% q/q as expected and same as in the first quarter of 2024, after a -0.2% q/q in the previous quarter.
Final manufacturing PMI for the month of April was revised up to 49 from 48.7 as preliminary reported. Both German and French readings were revised up and now show increases for every month of the 2025, four consecutive increases. Additionally, Italian reading smashes expectations while Spanish reading came in below. Output has increased as a result of falling input prices.
Preliminary April inflation report for the Eurozone saw headline number drop to 2.2% y/y from 2.5% y/y in March while a drop to 2.1% y/y was expected. More worrying is the jump in core reading to 2.7% y/y from 2.4% y/y the previous month which was bigger than 2.5% y/y markets expected. Rise in core will give headaches to the ECB. French inflation remained at 0.8% y/y for the third straight month while German ticked down to 2.1% y/y from 2.2% y/y in March but markets were expecting a 2% y/y print.
GBP
Final manufacturing PMI reading for the month of April saw a positive revision to 45.4 from 44 as preliminary reported thus making the reading improve from 44.9 in March. The details are not encouraging at all. The main reason for better than preliminary reading was increase in input prices which rose to a 28-month high. New orders and especially new export orders as well as employment all decreased.
This week we will get BoE meeting where a 25bp rate cut is penciled in.
Important news for GBP:
Thursday:
BoE Interest Rate Decision
AUD
Q1 inflation data saw headline number come in at 2.4% y/y, unchanged from previous quarter, but higher than 2.2% y/y as expected. Core measure dropped to 2.9% y/y, as expected, from 3.2% y/y seen in Q4 of 2024. RBA targets core inflation in 2-3% range and with it falling into the range for the first time since Q4 of 2021 it significantly raises odds of another rate cut in May. Elections will be held on May 3.
Official PMI data for the month of April showed first deterioration in economic activity caused by “Liberation Day” tariffs. Manufacturing dropped down into contraction with a 49 reading vs 50.5 in March. The biggest drop was seen, of course, in the new orders index which plunged to 44.7 from 49 the previous month. Non-manufacturing PMI fared better as it printed 50.6, staying in expansion and helped keep composite in expansion as well with a 50.2 print, down from 51.4 the previous month. Caixin manufacturing PMI managed to stay in expansion with a 50.4 reading but details paint a worrisome picture. New orders managed to increase slightly but new export orders plunged. There were drops in jobs and input prices while business optimism decreased sharply. PBoC deputy governor stated that RRR and interest rates will be cut at an appropriate time as focus is on economic growth.
NZD
Kiwi has enjoyed risk on mood in the markets spurred by rumours about trade talks between US and China. Any deescalation or lowering of tariffs between two countries is seen as good for the commodity currencies and China proxies and kiwi gained against all majors.
This week we will get Q1 employment data.
Important news for NZD:
Wednesday:
Employment Change
Unemployment Rate
CAD
Liberals won election Carney officially new Prime Minister. However, they have won 169 seats in the parliament but 172 are needed for majority. New cabinet should be announced on May 18.
February GDP saw economy shrink by 0.2% m/m vs coming in flat as expected. This decline comes after 0.4% m/m growth in January and with advanced reading for March seen at 0.1% m/m it should bring a positive Q1 reading for Canada. The issues will start in April and Q2 when we see effects of tariffs on economic activity.
This week we will get employment data.
Important news for CAD:
Friday:
Employment Change
Unemployment Rate
JPY
BoJ has left rate unchanged at 0.50% as was widely expected but come out with less hawkish, more dovish tone. Inflation forecasts have been slashed down and core CPI is now seen at 2.2% y/y for 2025, down from 2.4% y/y in January. Core-core reading is seen at 2.3% y/y vs 2.1% y/y in January, but it is seen coming down below 2% to 1.8% y/y in 2025 vs 2.1% y/y as was seen in January. Growth expectations have also been revised down with 2025 GDP now seen at 0.5% vs 1.1% in January. Uncertainty surrounding economy is very high and risks towards economic outlook and inflation are skewed to the downside. On the trade barriers caused by tariffs the bank sees case for higher input costs and thus lower demand if disruptions in global logistics lead to restructuring of supply chains. BoJ Governor Ueda repeated dovish messages but at the end added that “delay in price goal timing doesn’t mean a delay in hikes” indicating that intention is still to continue with rate hikes.
CHF
SNB total sight deposits for the week ending April 25 came in at CHF451.1bn vs CHF448.3bn the previous week. Deposits have been rising for four straight weeks and now reach levels seen at the end of March. Additionally, SNB is lowering the threshold factor for the remuneration of sight deposits of account holders subject to minimum reserve requirements from 20 to 18, effective as of 1 June 2025. This move should move funds deposited in the bank into real economy.
