The Fed minutes and recent Fed speakers suggest that the bar for beginning the normalization process has been lowered. With only one rate hike priced this year, there remains scope for re-pricing in US rates and further USD strength.
However, it appears the Fed is also now leaning toward a more gradual hiking cycle with much dependent on incoming data and market reaction. As such, regarding the former, the health of the US consumer remains crucial.
This week, we will get retail sales data on Tuesday, which are likely to show a bounce back from the weak outturns in December through February. A stronger bounce will confirm that a lot of the weakness in preceding months had been weather related.
Barclays says they look for headline retail sales to have risen 1.1% m/m (consensus: 1.0% m/m) and expect core retail sales to have increased by 0.5% m/m (consensus: 0.5% m/m), suggesting better momentum after three months of disappointing results.
Other key data next week include IP (Wednesday), housing starts (Thursday) and CPI (Friday). The economists' forecasts are slightly below consensus expectations.
"We expect that March IP fell 0.5% m/m (-0.3% m/m) and forecast headline CPI to have increased by 0.2% m/m (consensus: 0.3% m/m) and core CPI to have increased by 0.1% m/m (1.6% y/y) relative to consensus expectations of 0.2% m/m (1.7% y/y). Overall, our forecasts are moderately USD positive", added Barclays
