• MON: German Retail Sales (Mar); EZ and US Manufacturing Final PMI (Apr); ISM Manufacturing PMI (Apr); UK Bank Holiday, Chinese Labour Day & Japanese Constitution Day
• TUE: RBA Policy Decision, UK Manufacturing Final PMI (Apr); US Durable Goods R (Mar); New Zealand Jobs Report (Q1); Riksdag Hearing on Riksbank Monetary Policy; Chinese Labour Day
• WED: BCB Policy Decision; EZ and US Services and Composite Final PMI (Apr); US ADP National Employment (Apr); ISM Services PMI (Apr)
• THU: BoE Policy Decision; Norges Bank Policy Decision; CBRT Policy Decision; CNB Policy Decision; BoJ Minutes; Chinese Caixin Services PMI (Mar); EU Foreign Affairs Council Meeting (Defense); Scottish Parliament Election
• FRI: US and Canadian Labour Market Reports; Chinese Trade Balance

NOTE: Previews are listed in day-order

ISM MANUFACTURING PMI (MON)/ SERVICES PMI (WED): The Street expects the Manufacturing ISM to print at 64.9 from 64.7. The Non-manufacturing gauge is seen at 64.0 from 63.7. Analysts have noted that the manufacturing survey data has remained firm as the economy reopens and fiscal stimulus filters through and supports demand. But Credit Suisse observes that the "ISM has recently been a positive outlier though, and the headline index has been boosted  by  extreme  strength  in  supplier  delivery  times,  which  should  moderate as supply-chain pressures begin to ease." Even so, the bank says that going forward, manufacturing output is likely to remain strong even as the peak impact from fiscal stimulus fades." It does however warn that bottlenecks in the supply chain, and supply disruptions will continue to be a headwind, but has argued that for now these only seem to be limiting growth, not preventing it. "We expect growth momentum to accelerate in the near term and remain above trend through the end of the year," the bank says.

RBA POLICY DECISION (TUE): The RBA is expected to leave the Cash Rate Target and 3yr Yield Target at 0.10%, while it is also likely to maintain the parameters of its QE program. The RBA has continuously reiterated that the Board remains committed to maintaining highly accommodative policy until its goals are met and that it will not raise the cash rate until inflation is sustainably within the 2%-3% target, although it does not expect to reach inflation and employment goals until 2024 at the earliest. This suggests that rates are set to remain at the current record low during the next three years and therefore focus for central bank policy will be centred on the QE programme which it had previously announced to extend by AUD 100bln at a rate of AUD 5bln per week which should last to September. Furthermore, Westpac forecasts the RBA will extend this by another AUD 100bln and a shift of purchases to the November 2024 Bond which it expects to be announced at the August meeting, while Westpac anticipates a winding down of the Term Funding Facility which it suggested could be announced at next week’s meeting. The latest data releases have been mixed which support the forecasts for a pause as Employment Change in March beat expectations at 70.7k vs exp. 35.0k although this was solely due to Part-Time Employment, while the Unemployment Rate declined to 5.6% from 5.8% despite an increase in the Participation Rate. Furthermore, inflation data for Q1 was softer than expected with headline CPI at 1.1% vs exp. 1.4% and the RBA’s preferred trimmed mean CPI at 1.1% vs. Exp. 1.2%, which remains significantly below the RBA’s 2%-3% target. Another factor likely to influence the RBA to stick to its current policy settings is the easing by global counterparts, especially the Fed which have made it clear that they are not at the point to discuss tapering. This effectively restricts the RBA from tightening policy as doing so whilst other central banks remain accommodative, would risk causing an appreciation of the currency which policymakers would want to avoid.

NEW ZEALAND JOBS REPORT (TUE): The headline unemployment rate is seen steady at 4.9% in Q1 with the participation rate seen ticking higher to 70.3% from 70.2%. The jobs growth metric is forecast to decline to 0.1% from 0.6% Q/Q whilst the Labour cost index numbers are seen at 0.3% (prev. 0.5%) and 1.5% (prev. 1.5%) respectively. Desks suggest that recent data point towards the job market holding up better than initially expected. Analysts at Westpac expect some positive omens out of the Household Labour Force Survey (HLFS) releases, with a steady unemployment rate and a small lift in employment. That being said, the bank caveats that the unemployment rate has been subject to major forecasting errors over the past year. "Our best assessment of the last three months is ‘steady’, but we recognise that the survey could surprise in either direction.", the bank warns, but all-in-all shouldn’t faze the RBNZ.  

BCB PREVEW (WED): The BCB's weekly poll saw economists predict that inflation would rise above 5% this year, which could stoke the BCB into lifting rates at its policy meeting. The survey showed economists see 2021 at 5.0%, above the BCB's target of 3.75% by the end of the year, and near the upper 5.25% limit of its target range. Accordingly, the COPOM is expected to repeat last month's 75bps hike, taking its Selic rate to 3.5%, according to Reuters, although some desks are expecting a larger move.

UK LOCAL/SCOTTISH NATIONAL ELECTIONS (THU): Next week will see UK local elections and Scottish Parliamentary elections; from a market perspective, there will be more interest on the latter. Focus for the outcome of the election in Scotland will centre around the composition of lawmakers, and specifically, how it favours the Scottish independence push. The pro-independence movement is pursuing another referendum post-Brexit on the basis that 62% of Scots voted in favour of remaining in the EU in the 2016 referendum. The campaign is currently supported by the SNP, Scottish Greens and the newly-formed Alba party (headed up by Alex Salmond), and is opposed by Scottish Conservatives, Labour and Liberal Democrats. According to an FT poll of polls, the SNP is on track to remain the largest party in Parliament and could hit the 65 seat threshold to gain an overall majority. Even if they fall short, the expected performance for the Greens should ensure a pro-independence majority. It is important to note that a pro-independence outcome would not automatically trigger a referendum on independence. Permission for a referendum would need to be granted via a Section 30 order from the UK government; something which PM Johnson currently opposes. As such, the Scottish government could attempt to pass a bill allowing a referendum to take place without a Section 30 order. However, this could undermine the legitimacy of the referendum and impair its chances of success with opinion polling for independence currently on a knife-edge. From a markets perspective, little reaction is expected in the immediate aftermath of the election results (final results might not be known until the weekend amid COVID-related disruptions to the voting process). However, if momentum grows for another referendum, Credit Suisse cautions that “UK assets would need to start pricing in a political risk premium for a potential break-up of the UK”. 

BOE PREVIEW (THU): The MPC is set to hold the Base Rate at 0.10% and its asset purchase facility at GBP 895bln via unanimous votes. The upcoming announcement and MPR release come against a backdrop of encouraging domestic data releases and an impressive vaccination drive in the UK. Optimism surrounding the former has in part been due to the government’s roadmap for exiting lockdown, which was presented after the February MPR and will therefore have some bearing on the upcoming report. The most recent monthly GDP print for February revealed growth of just 0.4%, however, showed the adaptivity of the UK economy to lockdown conditions; looking ahead, ING expects a 5% expansion in Q2 as the economy reopens. Survey data reflects the upbeat outlook for the economy with the April PMI report showing the services sector rising to 60.1 from 56.3 as Markit noted that companies are reporting a surge in demand for both goods and services. From an inflation perspective, Y/Y CPI remained lacklustre at just 0.7% in March, however, base effects from 2020 are set to see the metric rise above 2.0% in the coming months, an outcome that will be attributed to ‘transitory’ factors. Commentary from the MPC has been relatively sparse since the prior meeting, however, HSBC notes that their “sense is that the divide between more cautious external members and their more bullish internal colleagues persists.” The dynamic on the MPC will come into greater focus over the coming months as Chief Economist Haldane and external member Vlieghe leave the bank in June and August respectively. Alongside the decision itself, participants will be eyeing the accompanying market notice outlining the upcoming pace of asset purchases under its APF. As it stands, purchases amount to GBP 4.4bln per week and are expected to run until the end of the year. UBS notes that purchases would need to be slowed down to GBP 3.5bln per week in order to reach the GBP 875bln limit by mid-December with the Swiss bank adding that such a move would amount to “little more than fine-tuning.” From a rate perspective, rate hikes are still some way off, but it is worth remembering that the BoE tasked staff at the Bank with reviewing its strategy on the sequencing of tightening in February. An announcement is unlikely at this stage, and will likely form a part of the narrative surrounding the Bank in the coming months. UBS expects the accompanying economic projections to reveal an upgrade to the 2021 GDP forecast with 2022 and 2023 left broadly unchanged. Inflation forecasts are set to see little in the way of material changes.

NORGES PREVIEW (THU): May’s interim (non-MPR) meeting will not include any update to the depo path or fresh forecasts, though attention will be firmly affixed on any hawkish hints with policy parameters themselves likely to be unchanged. In March, the Bank lifted its rate path to price in a 10bp (13bp) move in December 2021 and a full 25bp hike (31bp) by March 2022. As there is no fresh repo path this time, attention will be on how/if Governor Olsen’s language at the last meeting, that it will be appropriate to raise rates gradually “when there are clear signs that economic conditions are normalising…”, differs and whether it implies a more hawkish/dovish outlook. Since the last MPR, data prints have not added too much to the argument either way with February GDP soft, but outdated, though March's manufacturing PMI increased (April PMI due Monday 3rd) and serves as the timeliest indicator currently available. Overall, the Bank will likely wait until the June MPR following the Q2 regional network survey to provide an update to the rate path.

CBRT PREVIEW (THU): The CBRT is wholly expected to stand pat on its Weekly Repo Rate at 19.00% as per all analysts polled by a major newswire. Chances of a hike have dwindled since governor Kavcioglu took the helm following President Erdogan's intervention, but that being said, the governor seems reticent to prematurely cut rates as he noted that policy will remain tight until the indicators point to an inflation decline, whilst he added that the inflation outlook has deteriorated and heavily emphasised the central bank's data-dependency. However, central bank independence continues to be a grey cloud over investors’ heads, whilst the economy is also expected to take a hit from its latest COVID-related lockdown. Earlier in April, the government weighed in on the CBRT's previous statement which took out the tightening bias. Erdogan's adviser said he does not see any signs of an early rate cut in the CBRT statement, and added it indicates data-based policy and the omission of tightening bias in the statement does not mean tightening is ruled out. Morgan Stanley expects CBRT to keep rates on hold on May 6th and beyond, whilst other analysts suggest the central bank is stuck between a rock and a hard place - between the inflation/TRY-rate vs the broader economy and Erdogan's influence.

US LABOUR MARKET (FRI): The April data will be the first to show how the labour market has been affected by the American Rescue plan, and analysts expect 925k nonfarm payrolls will be added to the US economy in April (the range is currently between 755k and 1.25mln, although some desks have said they would not be surprised by a 2mln print), while the jobless rate is expected to decline to 5.8% from 6.0%. Analysts have been encouraged by the progress in the labour market, where surveys like the recent ISMs and the Fed's Beige Book show firms are finding it difficult to attract staff, which is stoking hopes that wage pressures may rise ahead. In the week that coincides with the BLS payrolls survey, weekly initial jobless claims improved significantly, underpinning hopes of a decent print. Analysts have also been encouraged that the consumer has responded to government stimulus efforts, as evidenced by recent retail sales data. If the data comes in line with expectations, it would represent another solid print, although it is not expected to catalyse a hawkish turn in the policy cycle; Fed officials have said that the labour market still has a long way to go, with over 8mln Americans remaining out of work relative to pre-pandemic levels. The Fed wants to see more actual evidence slack is being eroded before signalling policy tightening. In that regard, the U6 underemployment rate, and the participation rate will both be eyed within the release -- the latter was 61.5% in March, still off the 63.4% seen in January 2020.

CANADIAN LABOUR MARKET (FRI): At present, Eikon does not have a consensus forecast for the April jobs numbers. Canadian bank RBC forecasts a pullback in April, however, after the 562k of gains seen in the previous two reports, arguing that much of the country is still grappling with a strong third wave of COVID cases, and pandemic restrictions have been re-tightened lately. "A decline of 85K seems reasonable to us, with a 100K drop in the hardest-hit categories driving the result," RBC writes, adding that "the latter would only be a partial unwind of more than 350K in gains for the categories in February and March." The jobless rate, therefore, would rise around 0.2ppts to 7.7%, the bank says, as should hours worked. However, looking ahead, RBC thinks that weakness will be temporary as Canadians are more widely vaccinated; May's data will depend on the extent to which different provinces reopen.