Week Ahead: US GDP, Core PCE, NFP, Earnings, EZ & Aus. CPI

Weekly Recap

Trump trade tariff developments dominated again last week. While there is still a lack of clarity, the tone was more optimistic amid hopes of Trump’s administration as well as China softening its stance. The latest developments, China granting some US imports exemptions from its 125% tariffs, in the clearest sign yet that Beijing is worried about the economic fallout from a trade war with Washington, meaning it could be ready to de-escalate tensions between the world’s two largest economies. Trump also said that tariffs on China were too high and won’t remain at those levels. 

Meanwhile, corporate earnings have displayed some resilience, particularly Alphabet’s results, which offered relief that profit margins are holding up better than feared. 

As a result of the improved mood, Gold fell away from its all-time high. The US dollar rose across the week after 4 weeks of losses, and U.S. stocks posted solid gains. The Nasdaq led US indices higher, rising 6.7% last week. 

Earnings  

Earnings season ramps up this week with key reports due from several magnificent seven stocks, including Meta, Microsoft, Apple, and Amazon. Last time big tech delivered earnings, Trump had just started his presidency, stocks were soaring on expectations of a pro-growth government, and investors’ primary concern was how quickly companies could convert AI spending into profits. Three months later, AI concerns have taken a back seat to the possibility of a tariff-induced recession. Even so, Wall Street is still expecting an average of 15% profit growth in 2025 from the magnificent 7 a level, which has barely budged since the start of March and could be a little optimistic. Any earnings or guidance shortfall could pull the stock indices lower. 

The S&P 500 has recovered from its 2025 low. However, weak guidance from big tech could limit the upside. 

Canada election (Monday) 

The Canadian election will take place on Monday, with the liberals led by Prime Minister Carney expected to win by a small majority, according to your government surveys. Since the imposition of Trump’s tariffs, Liberals have seen a boost in polling, and the first poll showed a liberal majority of 21, which was seen as a small but workable majority. Canada has six time zones, and polls close at 9:30 PM ET, after which votes are counted. Results could be available shortly after polls close. Mark Carney enhanced his reputation with his leadership during the 2008 financial crisis as the governor of the Bank of Canada. A win by Carney could be seen as supportive for the loonie, given his technical profile and crisis management experience. Even so, tariff developments will continue to be the main driver, given that the CAD has shown high sensitivity to the issue in recent months. 

If the election brings no major surprises and trade policy remains favourable, USD/CAD could continue to fall further. 

Chinese official PMI (Wednesday) 

Manufacturing and non-manufacturing Chinese PMI data will be released on Wednesday, marking the first major activity indicators since the latest escalation in the US-China trade war. The markets will be watching closely for any signs of trade-related weakness, particularly in the export-driven manufacturing sector. In March, the manufacturing PMI printed just above 50, the level that separates expansion from contraction. A downside surprise in the April figures could reinforce expectations of more targeted easing measures and support the case for further stimulus. The Caixin PMI, focusing more on small and medium-sized enterprises, will be released on the same day. 

The Hang Seng has recovered from the April low of 18,830 to 22,200. However, weak PMI data could limit the recovery. 

Australian CPI (Wednesday) 

Australia Q1 CPI data will be released on Wednesday and is expected to show a moderate rebound from the subdued Q4 print. Expectations are for headline CPI 0.8% Q/Q and 2.2% Y/Y vs 0.2% and 2.4% in Q4. Core inflation is expected to ease to 0.6% and to 2.8% annually from 3.2%, suggesting underlying momentum continues to soften. The data is expected to remain well within the RBA’s 2% to 3% target band, reinforcing the view that policy will likely remain on hold in the near term. 

AUSD/USD has rebounded from the 0.5915 2025 low and hovers around 0.64. A hotter-than-expected CPI could help AUD/USD rise above 0.6440. 

US GDP & Core PCE (Wednesday) 

The US economy grew by a stronger-than-expected 2.4% annualized in Q4 last year; however, Q1 1 2025 growth is expected to slow significantly to 0.4% amid deteriorating consumer and business confidence, and rising trade tariff uncertainties. The Atlanta Fed GDPnow model estimates a 2.5% contraction, suggesting plenty of downside risks. This is the first major data point on how tariffs may be shaping broader recession risks. 

US cool PCE, the Fed’s preferred gauge for inflation, is expected to ease considerably to 0.1% month on month, down from 0.4% previously. A softer print could raise Federal Reserve rate cut hopes in response to weaker growth; however, it could also highlight a more fragile consumer backdrop. Federal Reserve Chair Jerome Powell has been clear that the Fed is in no rush to take out rights due to trade tariff uncertainty. 

Weak growth and cooler-than-expected US inflation could raise recession worries, pulling the USD lower and boosting USD crosses such as GBP/USD. 

BoJ (Thursday) 

The BoJ is widely expected to keep rates unchanged at 0.5% after raising them by 25 basis points in January and pausing in March. 

With no rate change expected, attention will be on the Bank of Japan’s updated economic projections and guidance. The market sees a further 25 basis point hike in the second half of this year. However, downside risks to growth owing to global trade tensions and lack of progress in US-Japan trade talks support a more cautious view. 

Japan’s core inflation increased to 2.9% annually in March, its highest level in a year, highlighting underlying price pressures. However, wage dynamics are a key constraint, as inflation-adjusted real wages continue to decline, weighing on household consumption. Until this metric turns positive, the BoJ may be tempted to sit on the sidelines. See graph for USD/JPY.

US Non-farm payroll (Friday) 

In the March nonfarm payroll report, 228,000 jobs were added, well above expectations, but February’s was downwardly revised to 117,000. The unemployment rate rose 4.2%, slightly above forecasts, due to a higher participation rate and has remained between 4% and 4.2% for over a year, aligning with Fed Chair Powell’s remarks that the labour market is broadly inbalance. 

April’s payrolls are expected to rise by 175,000, with the unemployment rate remaining at 4.2%. The market continues to price in 80 basis points of Fed rate cuts by year-end, with the first move fully priced in for July. Any signs of weakness in payrolls could hit sentiment, raising recession fears and driving renewed demand for safe-haven Gold. 

Eurozone CPI (Friday) 

Eurozone inflation is expected to cool in April to 2% year on year, down from 2.2%. With inflation heading towards the ECB’s target and concerns over the growth outlook due to Trump’s trade tariffs, the data could support a further rate cut from the ECB in the June meeting. The ECB has cut rates seven times since the start of the easing cycle to 2.25%.  

EUR/USD has benefited from safe-haven flows and the reallocation away from the US. However, easing trade war fears saw the pair fall last week. Should the mood surrounding trade wars continue to improve and Eurozone inflation weaken, EUR/USD could come under pressure this week.  

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