The Weekly Update

Last week the 10-year UST climbed above the “psychological” 3% level and eventually rallied after Draghi’s dovish post-meeting Q&A tones; closing at 2.96%, flat over the week. The US dollar also had a positive week; the DXY Index gained 1.36%. The most closely watched event was the historic Korean summit which saw both leaders cross over each threshold holding hands; North Korea subsequently changed its time zone bringing it in line with South Korea, and stated its denuclearisation intentions. Elsewhere, UK’s economic data disappointed with CPI, growth and wage inflation all below expectations; adverse weather, which doesn’t appear to be shifting any time soon was to blame; expectations for a further tightening have been dampened.

The key events this week are the FOMC decision on Wednesday, US employment prints on Friday and a potential US trade envoy to China. With Japan out most of the week celebrating Golden Week and some markets closed for labour day we expect any newsflow to be thin. This morning kicked-off with China's official March PMI readings which were above expectations. This afternoon we will receive the Fed’s favoured PCE prints from March, market expectations are for a rise on the core reading to 2% yoy. Personal income and spending as well as US pending home sales follow. German and Italian inflation releases will be watched closely as could Mexico’s GDP print.

A busy Labour Day, will see the FOMC meeting commence on Tuesday with a decision (of no change to rates) expected on Wednesday. Also on Tuesday, with recent mixed earnings, all eyes will be on Apple. US ISM prints, which have remained robust could also grab market focus on Tuesday, as could auto sales. The US is expected to announce its debt issuance schedule on Wednesday; no doubt this will be a focal point for markets as concerns over the the ever growing government deficit increase. Wednesday will also see the FOMC decision (Bloomberg has a ~5% chance of a hike), the EC spring economic forecasts, and further Brexit negotiations. Euro-Area inflation and the US trade balance are due on Thursday. Current expectations for Friday’s non-farm payroll report are for unemployment to fall to 4%, with average hourly earnings stable at 2.7% yoy.

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