US: Consumer prices and retail sales in focus - BBH

Analysts at BBH explain that it is a partial holiday in the United States, where the stock market will be closed but the focus will be on the release of March consumer prices and retail sales data.  

Key Quotes

“Headline CPI is expected to be flat, which would allow the year-over-year rate to ease to 2.6% from 2.7%.  The core rate, on the other hand, may tick up to 2.3% from 2.2%.  That would put it back at the upper end of where it has been since early last year.”

“Headline retail sales may be dragged a little lower by the softness in auto sales and gas prices.  Excluding these components, retail sales are expected to have increased by 0.3%, which is also what the GDP component is expected to have risen.  The risk, however, is on the downside.  Consumers have pulled back in Q1 17 after a strong showing in Q4 16.  In addition, the poor weather in part of March that depressed auto sales may have deterred shopping more generally.”

“Nevertheless, we argue that the Fed's hike last month renders Q1 data less relevant.  The forward-looking nature of monetary policy means the March data will not influence the FOMC's decision in June (there is practically no chance of a May move).  We do note that since the US election last November, the Fed has hiked interest rates twice, more than in the previous eight years.”

“US 10-year yield fell 14 bp this past week.  It is the fifth consecutive weekly decline and the biggest since early last June.  The yield on the two-year note fell eight basis points this week, which is also the most since last June.  The US dollar fell against all the major currencies this week (and on the day is only up against the New Zealand dollar), led by the Japanese yen (2%) and sterling (1.1%).  The euro and Danish krone are the poorest performers, gaining around 0.3%.”