Week Ahead – Fed to be a yawn but glowing US data could spoil the calm

 | Apr 23, 2021 10:01AM ET

Never have central bankers so seemingly sung from the same hymn sheet as Fed policymakers have in the past few weeks. Having successfully aligned market expectations, the Federal Reserve is almost certain to repeat the message that QE tapering is not on the near-term horizon when it meets next week. The Bank of Japan is also not expected to diverge from recent language when it announces its latest policy decision. Traders are therefore likely to turn their focus on the economic data as they could confirm that the boom time in America is here just as the Eurozone slips into a double-dip recession.
BoJ to upgrade growth forecasts as Japan fights fourth wave

Japan is one of the least virus-hit countries in the world despite never having gone into a full lockdown. But Covid cases are rising again, which means several regions could be placed in a state of emergency, curbing business activity. Nevertheless, strong demand for exports is supporting the economic recovery and the Bank of Japan is expected to revise up its growth forecasts when it concludes its two-day policy meeting on Tuesday.
The brightening outlook has yet to translate into higher price pressures and the BoJ will probably lower its inflation forecast for the current financial year. But aside from the updated projections, not much else is expected to change at the April meeting. The Bank has already adjusted some of its existing policies to make them more sustainable, sending a clear message to the markets that it will stick with its mix of monetary easing measures for some time to come.

Flash inflation estimates are also out on Friday and are expected to show the headline figure edging up to 1.6% year-on-year in April. Other notable releases next week are Germany’s Ifo business climate index on Monday and the Eurozone economic sentiment indicator on Thursday.
Booming US economy might eclipse FOMC meeting
The second quarter has gotten off to a banging start on Wall Street. A positive opening of the earnings season, accompanied by a very dovish Fed, have pushed the S&P 500 to fresh all-time highs. The earnings season will be firing up next week, with Tesla (NASDAQ:TSLA), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) being some of the big names scheduled to report their results.
The economic calendar is also looking jampacked. Durable goods orders (Monday), the consumer confidence index (Tuesday), advance GDP and pending home sales (Thursday), and the personal income and outlays report (Friday) will all be watched closely as US growth picks up a gear.
The preliminary GDP print for the first quarter is expected to reveal that annualized growth accelerated to 6.5% from 4.3% as the US economy benefited from two injections of fiscal stimulus. Personal income is forecast to have jumped by 20.3% month-on-month in March, as Americans received their third stimulus checks from the federal government. Although consumption is projected to have risen by a more ‘moderate’ 4.3% m/m. The core PCE price index – the Fed’s preferred inflation gauge – is expected to have ticked up to 1.8%.