Week of April 24

Investors got some relief this week when US banks reported strong earnings, but other data showed cracks in the economy. After China reported better-than-expected Q1 GDP figures, attention is now on the preliminary reading for US Q1 GDP, and the first BOJ interest rate decision under the new governor.

Top Events in Review

The week started with good news after major US banks reported better-than-anticipated earnings and regional banks appeared to have weathered the latest banking crisis. Empire Manufacturing beat expectations, returning to expansion for the first time in five months and China's GDP beat expectations, growing at an annualised 4.8% compared to the 4.0% expected and 5.0% targeted by the government this year. 

A series of Fed speakers showed that members of the FOMC had yet to coalesce around a future rate trajectory, with hawks making the case for more hikes after the next meeting. The market continued to price in one more hike. 

UK data disappointed investors, with Claimant Count and inflation well above expectations, solidifying expectations of a hike at the next BOE meeting and opening the prospect of more hikes after that. Cable concluded the week mixed under 1.24 and after a failed attempt to reclaim 1.25. 1.2350 may act as short-term support come next week.

New Zealand inflation surprised to the downside, shaking the consensus that the RBNZ would hike. Kiwi ended the week in the red as bulls lost the 62-cent threshold, paving the way to 61 cents and the low of $0.6085.

Canadian inflation was lower compared to the prior year but above expectations. Loonie rose more than 1% by the week’s close, recapturing $1.35, but failing to hold that line might expose $1.3430.

US House Speaker McCarthy proposed lifting the debt ceiling with conditions. 

Biggest Market Movers

WTI trended lower throughout the week over concern about a recession and a surprise build in gasoline inventories, losing more than 6%. The gap at $75.55/bbl is back in focus. 

Q1 inflation weakened the Kiwi, nearly 4% down since April’s high. 

Gold trended lower as US treasury yields increased as the Fed returned to shrinking the balance sheet and general concerns over the economy's future. Prices remain glued around the $2k threshold. 

Natural gas got a more than 7% boost, closing its second week of gains and up around 15% since April’s low.

Top Events in the Week Ahead

The event likely to dominate next week's macroeconomic calendar is the advance reading of Q1 GDP from the US, though traders might be quite keen to see what happens at the first BOJ meeting headed by new governor Kazuo Ueda. 

US GDP and Ueda’s First BOJ in Focus

US GDP is expected to slow slightly for Q1 to an annualised rate of 2.3% compared to the 2.6% reported previously. 

The consensus is that there won't be any change in policy from the BOJ, but many observers have been making the case that it will need to adjust its YCC at some point and could start laying the groundwork for that. Traders will be keen to see what impact Ueda will have on how the BOJ operates and communicates. USD/JPY gained over 1% last week, with eyes on 135.00 should the short-term resistance at 134.00 gives way to bulls. Conversely, 132.75 is a short-term support.

More Inflation Figures to Set Market Expectations

There is an increased expectation around Australia's Q1 CPI figures after the surprise from New Zealand, as the two economies often move in tandem. Australian inflation is expected to slow to 6.8% from 7.8% prior and affirm the RBA's case to hold. Aussie spiked 1.20% last week but lost it all on Friday. If the 0.67 handle holds, some respite may be seen towards 0.6780, otherwise, riks towards 0.66 will increase. 

At the end of the week, France and Germany report their respective inflation numbers, giving some insight into what's expected to decelerate inflation for the Eurozone. France and Germany will also report flash GDP numbers, with the latter expected to be negative. EUR/USD closed the week in the red, with $1.10 marking the top and $1.09 at the bottom. A breakout outside this range might see increasing bets towards round numbers.

The US will also report the core PCE index, the preferred inflation measure for the Fed and expected to show a marginal monthly acceleration to 0.4% from 0.3% previously reported.

Earnings and Other Events

Monday has German Ifo Business Climate. Tuesday sees US CB Consumer Confidence. On Wednesday is the release of German GfK Consumer Confidence and US Durable Goods Orders. Friday sees US personal income and spending data and the Michigan consumer sentiment index. 

Earnings season is expected to peak this week with many names reporting, including Coca-Cola, Cleveland-Cliffs, Microsoft, Alphabet, Visa, UPS, Meta, Boeing, GDK, Amazon, AstraZeneca, Mastercard, Exxon and Chevron.