The week ahead - 22-26 April 2024

Eurozone – We expect a further modest rise in the composite PMI, driven by a pickup in services, and a continued bottoming out in manufacturing. The rise in the manufacturing PMI is likely to continue to be held back by declining delivery times as the disturbances related to the Red Sea unwind further, with forward-looking indicators such as new orders expected to show a further improvement. The German IFO is also likely to recover further, reflecting the bottoming out in German industry.

US: Q1 GDP is likely to have slowed further from the strong rates of growth in H2 23, but remain somewhat above-trend at around 2.5% annualised. This is expected to be driven by continued solid consumption, and trend-like growth in investment. PCE inflation is likely to come in less firm than the CPI data, partly because medical services inflation is seeing less upward pressure in the PCE index. Core PCE inflation in particular expected to decelerate slightly from February.

Asia – Rates decisions are in focus in the coming week. On Monday 22 April, we expect China’s 1-year loan prime rate to be maintained at 3.45%., after the PBoC left the 1-year rate on its medium-term lending facility unchanged at 2.50% last Monday. On Friday 26 April, we expect the Bank of Japan to keep its short-term rate target unchanged (range 0-0.1%), after hiking the policy rate for the first time in 17 years in March. Going forward, we expect the BoJ to keep a modest, gradual hiking path. However, ongoing yen weakness (partly driven by the pricing out of Fed rate cuts) means that there is an increasing probability that the BoJ may consider to come with the next rate hike earlier than the current consensus expectation of October 2024 (as indicated by market pricing). Also against that background, Governor Ueda may give more clues about the start of quantitative tightening.