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[IFX Gertrude]

Gbp Focus Remains on the Election



In a similar vein to last week where the final reading of UK Q4 GDP was unexpectedly revised higher, UK activity data this week should be consistent with robust economic activity. However, continued political uncertainty is likely to keep downward pressure on GBP. Barclays says they and consensus forecast the services PMI (Tuesday) to increase slightly to 57.0 in March from 56.7 in February while industrial and manufacturing output (Friday) should both increase 0.4% m/m in February (consensus: 0.3% and 0.4%, respectively). The Bank of England rate decision (Thursday) is widely expected to result in no change of policy and therefore no statement will be issued. Indeed, central bank guidance is likely to be lacking over the next five weeks. With the dissolution of parliament on 30 March, the BoE is now bound by "purdah" rules which prevent central bank communication until the final election results are known. The 7 May general election remains the least predictable in a generation and growing political risk premium ahead of the event is likely to support high levels of GBP volatility and weigh on GBP. "we forecast further GBP/USD depreciation to 1.42 in Q2 2015 and modest EURGBP appreciation towards 0.74 over the next one to two months as political risk premium increases", Said Barclays in a report on Monday

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[IFX Gertrude]

Europe Manufacturing Activity on a Slow Pace



Markets will focus their attention this week on Greece. A late payment of the IMF loan repayment of €460m on 9 April cannot be ruled out. Greece sent a list of reforms last week in the hope that it will allow the (partial) disbursement of the €7.2bn instalment under the remaining troika tranche. However, it is not sure that there is sufficient agreement for the Eurogroup to meet and decide before the next scheduled meeting (24 April). On the data front, the final estimate of the PMI should slightly disappoint from the flash, yet remaining at levels consistent with solid GDP growth in H1 15. German industrial output and export figures should point to a slow pace of recovery in the manufacturing sector in February although factory orders might suggest some improvement. French Industrial output for February and BoF business sentiment for March should also support the slightly firmer picture of the French economy. "we expect the Swiss headline inflation rate to rise slightly to -0.7% yoy in March, driven by higher oil prices over the past two months", Says Societe Generale.

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[IFX Gertrude]

Rbi Maintains Status Quo on Policy Rates, Further Rate Cuts are Still Likely

It did not come as a surprise that the Reserve Bank of India (RBI) maintained status quo on rates in its policy meeting today. The repo rate was kept on hold at 7.50%. This does not indicate an end to monetary policy easing, however; the RBI emphasised in its policy statement that its stance remains accommodative. Also, while the RBI has made the amount and timing of further rate cuts contingent upon four pre-conditions the governor said that "some progress" on these could trigger rate action. The RBI will watch for developments on (1) The transmission of a 50bps reduction YTD in the repo rate, (2) CPI inflation prints, especially after the recent unseasonal rainfall, (3) policy efforts to unclog supply bottlenecks and reduce the pipeline of stalled projects, and (4) the impact of the US Fed's expected interest rate normalisation on financial markets. Standard Chartered says they expect another 50bps reduction in the repo rate to 7.0% in FY16, equally split between the June and August policy meetings. The RBI will, by then, have fresh information on most of its pre-conditions, especially on transmission channels and the impact of weather on the CPI inflation trajectory. Remaining fairly confident that the first 25bps of policy rate reduction will occur by June, the subsequent 25bps reduction may be delayed if the RBI becomes concerned about the impact of the first Fed rate hike. "We see a risk that the last 25bps reduction may not occur if the RBI decides to keep real policy rates at the mid-point of its desired 150-200bps range, instead of at the lower end as we currently assume. We expect CPI inflation to average 5.4% y/y in FY16", Said Standard Chartered in a report on Wednesday

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[IFX Gertrude]

Japan's February Mor Likely Shrank



Japan will release February machinery orders (MoR) and March PPI inflation on 13 April. The MoR is expected to have declined by 2.0% m/m in February after dropping 1.7% m/m in January. "Exports and industrial production contracted m/m in February partly due to sluggish external demand; we think the MoR will follow a similar trend as it is an indicator of business capex. PPI inflation likely continued slowing in March, to 0.4% y/y from 0.5% y/y in February", says Standard Chartered Excluding the sales tax effect, PPI inflation likely dropped by 2.5ppt y/y in March. Prices in the energy sector contracted significantly in the first two months of 2015. The trend is likely to continue in March and put downward pressure on domestic PPI inflation.

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[IFX Gertrude]

Rbi Continues to Display a Clear Dovish Bias

The Reserve Bank of India (RBI) kept its key policy interest rates unchanged earlier this week, but continues to display a clear dovish bias, as indicated by its comment, that "going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data." The RBI also appears confident in achieving its retail (CPI) inflation target of 6% by early 2016. The bank highlighted that potential upside risks to inflation (ie, weather aberrations, administered price hikes, geo-political factors) are counter-balanced by global deflationary/disinflationary trends, the still soft outlook for global commodity prices and the slack in the domestic economy. "We continue to forecast a 25bp cut in the repo rate in June. We would also not rule out the risk of further easing, but this will depend on greater clarity on 2016 inflation and the impact of a potential Fed rate hike in H2 2015." - Barclays Capital said in a report on Friday

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[IFX Gertrude]

Swedish Inflation Data in Focus

Swedish inflation (Tuesday) is likely to dominate the agenda for the SEK in the coming week. In line with the projections and recent Riksbank rhetoric, market participants are looking for a further bounce in CPIF inflation to 0.3% m/m (1.1% y/y) from 0.8% m/m (0.9% y/y). Indeed, inflation has recently been surprising to the upside, with Riksbank officials acknowledging that currently easy monetary policy is having an effect. A further increase in inflation is likely to support the SEK against other European currencies such as the EUR and the NOK. "we remain cautious about a sustained SEK rally at this juncture given the Riksbank's recent emphasis on a strong SEK posing downside risks to the inflation outlook. Further ahead, we remain constructive on the SEK owing to positive fundamentals, an improved economic outlook and our expectations for further stabilization in inflation", Says Barclays

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[IFX Gertrude]

Us Consumers Likely returned to Shops in March

After dismal private consumption in January and February, partly due to the harsh weather, a rebound is likely in March: retail sales likely to be seen up 0.9% m/m (consensus: 1.0%), boosted by solid car sales, after -0.6% in February. Standard Chartered notes: We see core sales ex autos and gas up 0.4% from -0.2% in February. This should fuel hopes that GDP will rebound in Q2 after hitting a speed bump in Q1. We see the gas-pump savings starting to boost US consumption gradually, many consumers having opted to pay down debt rather than spend on other items so far. We see growth of 1.0% q/q SAAR in Q1, accelerating to 3.0% in Q2.

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[IFX Gertrude]

Bank of Canada may Stay Put at Its April Meeting

The Bank of Canada releases its policy decision at 10:00 ET on Wednesday, alongside its quarterly monetary policy report. "We think the overnight lending rate will be kept at 0.75%, as all analysts polled by Bloomberg also forecast. We do not entirely dismiss a rate cut - the memory of the 'surprise' January rate cut remains vivid", Says Standard Chartered Governor Poloz is not afraid of surprise moves - but the probability is relatively low. The tone as being dovish, and expect Governor Poloz to emphasise that the BoC remains open to cutting rates further later, depending on the data. A likely modest cut to the 2015 growth forecast (currently 2.1%) should add to the dovish slant.

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[IFX Gertrude]

Poland Will Probably Exit Deflation This Year[/B]

Although a stronger PLN may extend the period of deflation, a turning point has been reached in the deflationary cycle that began in August 2014. The CPI bottomed out in February, and after increasing in March, and it will likely gradually increase in the forthcoming months, turning positive again by the end of Q4 15. The central bank expects deflation to come in at -0.5% yoy at the end of 2015. The Ministry of Finance expects the country to exit deflation sooner than the central bank is forecasting. It is possible, however, that a stronger PLN and volatile oil prices create uncertainty around the ministry's expectation. "In its recent World Economic Outlook, the International Monetary Fund forecast Poland's CPI to accelerate to 0.4% yoy at the end of this year. In our opinion, it will instead be in the range of 0.1-0.3%", said Societe Generale in a report on Thursday

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[IFX Gertrude]

Canada: Cpi and Retail Sales Two Top Tier Data Releases Tonight



Tonight we get two top tier data releases in Canada: CPI and retail sales. A still-firm, but on-consensus CPI report is expected (RBC: core 2.1%y/y, cons: 2.1%), and considering the BoC seems to be more focused on activity indicators at the moment, that means the retail sales figure is more relevant and likely to get an FX reaction. The expectations are decently above consensus for retail sales (RBC: ex-auto 1.3%m/m, cons: 0.7%). That implies a CAD positive reaction, but that may only be a small influence compared to the direction of oil prices which have been the most important driver for CAD this week. RBC Capital Market Says "Our technical strategy team highlights 60.99 and 63.50 as the key levels above for WTI now that the long-held range has broken. For USD/CAD, they point out 1.2114 and 1.2066 as the key levels below, and see resistance located at 1.2253 and 1.2326"

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