The dollar put in a mixed performance last week against the majors. NOK, NZD, and AUD outperformed while CHF, JPY, and SEK underperformed. Despite U.S. claims of progress in trade talks, we remain skeptical that any agreement of substance can be reached to so quickly. Meanwhile, both U.S. and China data are expected to show signs of softening from the trade war and that will be negative for the dollar and risk assets.

AMERICAS

Trade brinksmanship is likely to continue. Data this week from both the U.S. and China are expected to show the first signs of impacting the two largest economies in the world. Treasury Secretary Bessent said “Their business model is predicated on selling cheap, subsidized goods to the U.S. And if there’s a sudden stop in that, they will have a sudden stop in the economy, so they will negotiate.” We wholeheartedly disagree. China does not face any electoral repercussions and so it can wait this out much longer than the U.S. can.

The Fed media blackout has gone into effect. Most Fed officials remain on hold but a couple (Hammack and Waller) last week brought up the notion of rate cuts sooner rather than later. Odds of a May cut are around 10%, rising to around 70% in June and fully priced in for July. With the 90-day pause in reciprocal tariffs set to end in early July, even that month seems too soon for a cut given the ongoing uncertainty regarding the tariff impact. When all is said and done, however, it will all come down to the data, and we get quite a bit this week.

Jobs report Friday will be the highlight. Most indicators suggest the labor market remains in solid shape. Yet Bloomberg consensus for April NFP is 130k vs. 228k actual in March, while its whisper number stands at 112k. Unemployment is expected to remain steady at 4.2%, while average hourly earnings are expected to pick up a tick to 3.9% y/y. Ahead of that, ADP reports its private sector jobs estimate Wednesday and is expected at 124k vs. 155k in March.

March JOLTS data Tuesday will also be closely watched. Job openings are expected at 7.500 mln vs. 7.568 mln in February. If so, it would be the lowest since September. Keep an eye on the openings rate, which stood at 4.5% in February. A drop below this level typically signals a significant rise in the unemployment rate. Weekly jobless claims and April Challenger layoffs will be reported Thursday and will help round out a more complete picture of the labor market.

Conference Board reports April consumer confidence Tuesday. Headline is expected to plunge to 87.6 vs. 92.9 in March. If so, it would be the lowest since January 2021 and would mirror the sharp drop in University of Michigan consumer sentiment.

March PCE data will be reported Wednesday. Headline is expected to fall three ticks to 2.2% y/y, while core is expected to fall two ticks to 2.6% y/y. The Cleveland Fed’s Nowcast model has headline and core at 2.2% and 2.5%, respectively. Looking ahead to April, that model has headline and core at 2.1% and 2.5%, respectively.

Personal income and spending will be reported at the same time. Income is expected at 0.4% m/m vs. 0.8% in February, while spending is expected at 0.6% m/m vs. 0.4% in February. Real personal spending is expected at 0.5% m/m vs. 0.1% in February. However, spending will be distorted by consumers buying goods to front-run the tariffs.

We get our first look at Q1 GDP data Wednesday. Bloomberg consensus sees growth of 0.4% SAAR vs. 2.4% in Q4, with personal consumption expected to slow sharply to 1.2% SAAR vs. 4.0% in Q4. Both headline and core inflation are expected to accelerate to 3.0% SAAR. The New York Fed Nowcast model estimates Q1 growth at 2.6% SAAR and still greatly contrasts with the Atlanta Fed GDPNow model, which estimates Q1 GDP at -2.5% SAAR and will be updated Tuesday after the data. The Atlanta Fed just announced that it would update its model to adjust for gold imports. It has already been releasing an alternative gold-adjusted estimate (now at -0.4% SAAR) since March but this will be incorporated into the standard model starting Wednesday with its initial estimate for Q2 GDP.

Q1 employment cost index will also be reported Wednesday. ECI is expected at 0.9% q/q vs. 0.9% in Q4. If so, the y/y rate should fall a couple of ticks from 3.8% in Q4.

April ISM manufacturing PMI will be reported Thursday. Headline is expected at 48.0 vs. 49.0 in March. Prices paid is expected at 73.0 vs. 69.4 in March. Of note, the regional Fed manufacturing surveys suggest downside risks. However, S&P Global manufacturing PMI rose to 50.7 vs. 50.2 in March and suggests upside risks. Ahead of ISM, Chicago PMI will be reported Wednesday.

Canada holds general elections Monday. The latest CBC News poll tracker shows Prime Minister Mark Carney’s Liberals holding a consistent lead over the Conservatives and are heavily favored to win a majority government. Carney is viewed favorably by financial markets due to his deep experience navigating the 2008 financial crisis and the impact of Brexit.

Canada data highlight will be February GDP Wednesday. Statistics Canada advance estimate indicates that real GDP by industry was flat in February vs. 0.4% in January. Increases in the manufacturing and finance and insurance sectors were offset by decreases in the real estate and rental and leasing sector, the oil and gas extraction subsector, and the retail trade sector. Of note, the y/y rate is expected at 1.8% vs. 2.2% in January.

EUROPE/MIDDLE EAST/AFRICA

Eurozone April CPI data will roll out. Spain reports Tuesday and its EU Harmonised inflation is expected at 2.0% y/y vs. 2.2% in March. Spain is one of the only eurozone countries to report core inflation and is expected at 2.3% y/y vs. 2.0% in March. France, Italy, and Germany report Wednesday. France’s EU Harmonised inflation is expected at 0.7% y/y vs. 0.9% in March, Italy’s is expected at 2.3% y/y vs. 2.1% in March, and Germany’s is expected at 2.1% y/y vs. 2.3% in March. Eurozone CPI data will then be reported Friday. Headline inflation is expected at 2.1% y/y vs. 2.2% in March and core inflation is expected at 2.5% vs. 2.4% in March. Inflation is close to the ECB’s 2% medium-term target and tracking the ECB’s projections for headline and core inflation to average 2.3% and 2.2% in 2025, respectively.

The ECB reports March inflation expectations Tuesday. 1-year expectations is expected at 2.5% vs. 2.6% in February while 3-year expectations is expected at 2.3% vs. 2.4% in February. With longer-term inflation expectations still well anchored around 2%, the ECB has scope to ease further and offset the drag to growth from the trade war.

ECB easing expectations have picked up. The market has fully priced in a 25 bp cut at the next meeting June 5. Looking ahead, the swaps market is pricing in nearly 75 bp of total easing over the next 12 months that would see the policy rate bottom near 1.5%. Look for the ECB hawks to push back this week against this dovish market pricing. Rehn and Guindos speak Monday. Cipollone and Holzmann speak Tuesday. Muller speaks Wednesday.

Eurozone Q1 GDP data will also roll out. Spain reports Tuesday and is expected at 0.7% q/q vs. 0.8% in Q4. France, Italy and Germany report Wednesday. France is expected at 0.1% q/q vs. -0.1% in Q4, Italy is expected at 0.2% q/q vs. 0.1% in Q4, and Germany is expected at 0.2% q/q vs. -0.2% in Q4. Eurozone GDP data will also be reported Wednesday and is expected at 0.2% q/q vs. 0.2% in Q4. This is what the ECB projects for Q1, but the growth outlook has weakened because of the trade war.

Bank of England easing expectations have picked up. The market has fully priced in a 25 bp cut at the next meeting May 8. Looking ahead, the swaps market is pricing in 100 bp of total easing over the next 12 months that would see the policy rate bottom near 3.5%. There are no major data releases this week, but we do get some BOE speakers. MPC member Ramsden speaks Tuesday, while MPC member Lombardelli speaks Wednesday.

ASIA

The two-day Bank of Japan meeting ends Thursday with an expected hold. Uncertainty surrounding the future development of trade policies support the case for a continued pause in the tightening cycle. The BOJ is also set to publish its updated Outlook Report. The bank will likely raise its inflation forecasts as both core and core ex-energy are tracking higher than it anticipated back in January. Despite rising price pressures, the Bank of Japan is seen on hold through 2025. Looking ahead, the swaps market is pricing in only 25 bp of tightening over the next 12 months.

Japan data highlight will be March real sector readings Wednesday. Retail sales are expected at 3.6% y/y vs. 1.3% in February, IP is expected at 0.7% y/y vs. 0.1% in February, and housing starts are expected at 1.0% y/y vs. 2.4% in February.

Australia reports March and Q1 CPI data Wednesday. Monthly headline is expected at 2.2% y/y vs. 2.4% in February. The quarterly CPI print is expected at 2.3% vs. 2.4% in Q4 while the policy-relevant trimmed mean CPI is expected at 2.8% vs. 3.2% in Q4. The RBA projects trimmed mean CPI of 2.7% throughout its forecast horizon through 2027. However, Governor Bullock cautioned that the Board does not have “100% confidence” that inflation is moving sustainably towards the midpoint of the 2-3% target range. For the next policy meeting May 20, the market has fully priced in a 25 bp cut as well as 15% odds of a larger 50 bp move. Looking ahead, the swaps market is pricing in 125 bp of total easing over the next 12 months.

Australia also reports March and Q1 retail sales data Friday. Nominal retail sales are expected at 0.4% m/m vs. 0.2% in February. In real terms, Q1 retail sales are expected at 0.3% q/q vs. 1.0% in Q4. Recent indicators suggest that some of the pick-up in retail sales has been sustained. However, the RBA warned that uncertainty about global economic policy settings could lead households to reduce spending in the near future.

April New Zealand ANZ business confidence index will be reported Wednesday. In March, business confidence dipped 0.9 points to 57.5, while expected own activity rose 3.5 points to a three-month high of 48.6. Reported past activity, which has the best correlation to GDP, improved 3.7 points to 0.8 and remains indicative of a soft recovery in economic activity. At its April 8 meeting, the RBNZ cut rates 25 bp to 3.50% and noted it “has scope to lower the OCR further as appropriate”. The RBNZ warned that “the recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation in New Zealand.” The swaps market is pricing in 75 bp of total easing over the next 12 months that would see the policy rate bottom near 2.75%. The risk is the RBNZ slashes rates further towards the lower end of its 2-4% neutral range estimate.