The Week Ahead
With only a light smattering of data and the Federal Reserve in a communications blackout period ahead of the April 28 Federal Open Market Committee (FOMC) meeting, the economic calendar will provide market participants with a bit of a hiatus this week.
Indeed, despite last week's slate of robust data, Treasury markets were most unimpressed with 10-year yields falling a few basis points on the week and Fed rate hike expectations being dialled back a bit. This was despite seeing the second most robust retail sales print in the series' history, combined with the third-highest core CPI print in about 15 years.
Strong US CPI and retail sales data were not enough to boost the USD, and the DXY is back below the 92 levels. With the USD momentum running out of steam lately, the attention turns once again to reflation trades and idiosyncratic factors ater a week that can best be summed up by the old saying: “it matters when it matters". That’s a succinct way of explaining the difference between fundamentals and the current narrative.
We could expect a little Spring cleaning this week as the market awaits the subsequent significant interest rate swing shifting narrative.
In summary, this week's relatively scant data docket and absence of Fed-speak suggests that bond markets will have to wait a while longer for the next catalyst from US macro. Beyond this week, there are plenty of candidates over the horizon – including the April 28 FOMC meeting and the April jobs report the following week.
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