The week ahead - 5-12 April 2024

Eurozone – The ECB is expected to keep policy unchanged at the April meeting. It probably will continue to signal that June will most likely be the starting point for rate cuts.

German Industrial production is expected to have expanded moderately in February following an increase of 1% m/m in January. The German manufacturing sector is still in contractionary territory and is showing early signs of bottoming out. New German factory orders, published on Friday, recorded a modest increase of 0.2% m-o-m and missed expectations of a larger increase. This shows industrial production is not yet set for a strong recovery and is likely to grow moderately compared to January. The series however is highly volatile on a monthly basis.

US - Headline CPI inflation is expected to remain firm on the back of rising gasoline prices, but we expect the core measure to soften, driven by renewed falls in used car prices and an easing in the pass-through of higher housing rents to the shelter component. Given the recent firmness in inflation, such an outturn would come as a relief to the Fed and to financial markets. The FOMC minutes for the March meeting are likely to sound somewhat hawkish over inflation worries, consistent with commentary from a number of FOMC members recently.

China – Inflation figures due coming Thursday are expected to confirm a picture of weak inflation or even deflation. CPI inflation is expected to have dropped a bit in March, after Lunar New Year factors drove it back to positive territory in February for the first time in five months. Meanwhile, producer price inflation is expected to stay in negative territory, for the 18th consecutive month. Monthly lending volumes are expected to show a rebound following the Lunar New Year related drop in February.