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.
Key Quotes
“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.”
