Week of April 28

The trade war narrative dominated the markets last week, with flash PMIs holding steady and US durable goods orders, alongside UK retail sales, surprising positively.

The calendar becomes busier next week with the release of Euro Area flash inflation, the US PCE price index, the BOJ's rate decision and Non-Farm Payrolls on the docket.

Week in Review

The week started slowly, with many markets closed on Monday for a holiday. Those that were open fretted over comments from US President Donald Trump implying that he would fire Fed Chair Jerome Powell, although he later clarified that this was not being considered. This sparked an upward trend in the markets for the rest of the week, aided by rumours of progress in tariff negotiations and better-than-expected earnings from several companies.

On the economic front, US durable goods orders beat expectations, rising 9.2% compared to 0.9% the previous month, but core orders were flat, suggesting that businesses were likely stocking up ahead of tariffs. Fed speakers discussed the uncertainty surrounding tariffs and potential slowing of business activity, with Beth Hammack (non-voter) mentioning a possible June rate cut if data supported it. US manufacturing came in slightly above forecasts; however, US expectations fell to the lowest level since the pandemic.

In Europe, UK retail sales surpassed forecasts, growing 0.4% rather than the expected -0.3%. Flash PMIs largely met expectations, with EU manufacturing slightly above forecasts, but prices were seen falling. Several ECB speakers implied that rates would likely fall further due to tariff effects, with hawkish members arguing that it was too early to discuss a rate cut at the next meeting, citing uncertainty in the trade situation.

In geopolitics, the US sought to pressure both sides in the Ukraine-Russia conflict to reach a swift agreement, with US Secretary of State Marco Rubio threatening to "move on" if no agreement was reached. A meeting of key foreign ministers in London to address the war was suspended after Rubio declined to participate, citing a lack of progress. A terrorist attack that killed 25 Indian citizens in the disputed Kashmir territory heightened tensions between India and Pakistan, with tit-for-tat reprisals and concerns over a potential war.

Biggest Market Movers

• Gold started the week at an all-time high above $3500/oz but trended lower as markets regained confidence after Trump said he would not fire Powell.
• The dollar gained through the week on improving risk appetite and hopes of progress in trade talks but remained below 100.
• The Swiss franc was among the worst-performing currencies as gold fell and safe-haven flows reversed.
• The USDJPY trended 1% higher after reports that the BOJ saw little need to change rates given uncertainty in the base case.

Top Events in the Week Ahead

The coming week will again be influenced by holidays, with most markets closed on Thursday and many still closed on Friday. With the US and UK markets open, however, a steady stream of data remains.

Non-Farm Payrolls in Focus

The highlight could be the US jobs data on Friday, which is expected to show a decline in the rate of growth in NFPs to 140K from 228K the previous month, with the unemployment rate projected to remain steady at 4.2%. Investors will want to examine the data for signs of economic weakness that could justify the Fed moving towards more easing.

On the central bank front, the BOJ is expected to keep rates unchanged when it meets on Wednesday despite inflation being above target. On the upside, the pair has resistance at 145, while on the downside, support lies at around the 140 handle.

Price Pressures in the Balance

The Euro Area is expected to report preliminary inflation figures for April, which are anticipated to return to the target of 2% from 2.2% previously, while the core rate is expected to make a similar move, rising to 2.2% from 2.4% previously. The ECB is in the midst of a debate on whether to pause the current easing cycle for a month at the next meeting. Meanwhile, the Federal Reserve's preferred measure for inflation is expected to be released on Wednesday, with the Core PCE forecast to decline to 2.5% from 2.8% previously. Fibre could see an increase in volatility, with 1.16 and 1.12 in focus.

US Growth Indications

The first look at US Q1 GDP is expected on Wednesday, with the average forecast anticipating a rapid deceleration to an annual growth rate of 0.5% from 2.4%, which contrasts with the Fed's GDPNow tracker, which projects -2.8%, but the adjusted model sees -0.4%. What will also likely garner a lot of attention is the US Treasury Refunding announcement, which forecasts the amount of borrowing the US government expects to undertake in the quarter and can potentially impact interest rates. Gold's downside could continue, with the potential to drop to $3200 or lower, unless demand for the haven metal sends the yellow metal back to record highs.

Other Events, Earnings

Monday has French jobless numbers. Tuesday sees German GfK consumer confidence readings, as well as US JOLTs job openings. Wednesday includes Japanese industrial production. Australia's trade balance comes out on Thursday. US factory orders are scheduled for Friday.

Earnings season is expected to go through its peak this week with important names reporting, such as Visa, Coca-Cola, AstraZeneca, HSBC, Microsoft, Meta, Qualcomm, Apple, Amazon, Eli Lilly, McDonald's, Shell, Berkshire Hathaway, Exxon, Chevron and Eaton.