Week Ahead: Trade talks eyed, US CPI released

It’s a relatively light week on the calendar, with US inflation data the main event, though even if this could be looked through as it won’t take into account the ongoing trade war and potential rising price pressures. Of course, trade negotiations will be at the front of investors’ minds, with the US-China talks in Switzerland currently taking place as we go to press. Any positive noises from this should dictate market price action to kick off the week, with many expecting tariffs to be brought down to 60%.

It’s tough to figure out how all these trade talks will pan out. Last week, the US and the UK did reach agreement to much fanfare. But in truth, it was no template for trade liberalisation with others and offered relatively minor changes instead of the ‘comprehensive’ trade agreement that Trump said it was. The UK still faces a 10% reciprocal tariff, even though the US has a trade surplus in goods with the UK. Extra tariffs, for example on cars, can be reduced or scrapped but they don’t make much difference for the overall tariff level.

More importantly for us, stocks and risk markets in general appeared ok with this scenario. And while the FOMC sounded anything but dovish last week, there is still close to three 25bps rate cuts priced in for this year to soothe risk takers nerves. The dollar too, picked up for a third straight week as it tries to build a base around 99 -100 on the Dollar Index. More bullish USD momentum will likely require a lot more positive trade deal news, especially with China.

In Brief: major data releases of the week

Tuesday, 13 May 2025

– UK Jobs: Unemployment is forecast to rise, though there are still reliability issues with this data. Crucially, wage growth is expected to cool to 5.2% from 5.6% due to base effects, though it remains elevated.

– US CPI: Expectations are for the headline to rise 0.3% m/m and 2.4% y/y respectively. Core prices are forecast to print at 0.3% and 3%. The data covers April so is likely to be stale, as most tariffs will show up in the June repot. There may evidence of pre-emptive price hikes.

Thursday, 15 May 2025

– Australia Jobs: The jobless rate is likely to have remained at 4.1% while employment barely grew over the first quarter, with population growth slowing.

– UK GDP: Q1 UK growth is expected to accelerate from almost zero growth in the previous quarter, with consumption leading the way. Strong GDP in February is likely to offset the March pullback. Going forward, growth should be supported by government spending.

– US Retail Sales: Activity ahead of big price hikes due to tariffs may help retail sales again in April. But consumer confidence has been hit hard and along with government spending cuts, may impact the key core and control group data.

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