After a slight lull, the currency and debt markets are again worried about the prospect of accelerating inflation. The US PPI released on Friday indicated strong acceleration, fueling the sell-off in long-dated bonds, which in turn caused the dollar to strengthen. It is logical that unnerved markets will be especially attentive next week to the data, directly or indirectly, helping to assess the path of inflation. The release of the US and Eurozone CPIs for March on Tuesday and Friday, respectively, command a spotlight next week. A surprise on the side of rising inflation in the US could put yields back on growth track, which will undoubtedly support the dollar.
On Monday, attention should be paid to the ZEW report on economic sentiment in Germany and data on UK GDP. If the UK economy data falls short of expectations, the chances of a reversal in EURGBP will rise, given that the pair has been on the decline for a relatively long time, reflecting the UK's strong track record against the virus and the speed with which restrictions are lifted.
On Wednesday, the decision on the interest rate is made by the RBNZ. A hint of premature withdrawal of stimulus programs will increase the likelihood of further strengthening of the NZDUSD.
Data on jobless claims and retail sales are due next Thursday. With initial claims disappointing this week with stronger-than-expected gains, labor market data will receive more attention than usual.
To complement the picture of recovery on Friday, China will release its GDP report on next Friday. The strengthening PPI we have seen this week suggests that a positive surprise is possible on Friday, which, again, will be interpreted as a signal of higher global inflation in the coming months.
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