US: FOMC and Q1GDP are Key Highlights – Westpac
Richard Franulovich, Research Analyst at Westpac, suggests that the US
data pace picks up notably this week, the FOMC and the first estimate on
Q1 GDP due (Thu) the key highlights.
“The employment cost index for Q1 (Thu) along with new home sales, durable goods orders, PCE and the Kansas, Richmond and Markit PMIs are all on tap too. The Atlanta Fed’s GDP nowcast model has outperformed consensus lately and is pointing to Q1 growth of 0.3%, below consensus (0.7%).
USD Bias: Still a challenging backdrop, a range of data suggesting Q1 growth will be sub-par while weak March import prices, PPI and CPI all suggest the recent jump in inflation may indeed prove transitory, much as Chair Yellen has said lately.
Safe to assume this week’s Fed meeting will build on the aforementioned, the guidance likely to signal a lack of urgency once again. Even though energy prices have firmed and risks around China and global growth seem to have dissipated the Fed is more likely than not to repeat, “global economic and financial developments continue to pose risks”. The Fed is likely to shy away from characterising where the risks lie for another meeting too.
All told hard to see a hawkish surprise though the Fed is nevertheless likely to keep the door open to hikes. A potentially softer Q1 GDP should add to the USD’s offered tone. USD weakness though shouldn’t extend more than a few weeks and no more than an additional 2-3% beyond current levels – a strong run of US data in Q2 has been a reliable feature of the macro landscape in recent years, a rebound effect from the residual seasonality that has tended to depress Q1.”