Data dependence is still a theme that could dominate over a longer-term basis, but I struggle to see it as a theme on a data point to data point basis.
Asymmetry of monetary policy neatly pairs with asymmetry of market risks to the data – because the FOMC is more worried that it has less room to operate should the data slow than it will if the data accelerate quickly, the market too may prove more sensitive to weak economic data that point toward the FOMC potentially having to face that uncomfortable situation of utilizing that limited policy space.
As a result, even strength in March retail sales, CPI, and industrial production, each key activity and price indicators released this week, may not be enough to move the dial on FOMC policy expectations.
Ironically, the evidence that the FOMC may need to see the most is a strengthening global outlook and, in the near-term, stronger global growth data may boost risk assets at the behest of the USD rather than boost the USD based on Fed expectations. That should support a solid risk environment and a challenging USD outlook.
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