The focus for the upcoming week will naturally be a wrath of Fed speak and the latest US CPI data which is expected to show inflation decelerated sharply last month. A sharper decline with prices could vindicate Fed Chair Powell’s decision to remove a 75 basis-point rate increase at the next couple policy meetings.
Russia’s inflation has been accelerating sharply since the invasion of Ukraine. In March, CPI rose to 16.7% (YoY) and is expected to climb to 18.1% in April. The driver behind the sharp upswing has been Western sanctions, which have reduced the availability of consumer imports and key components for domestic products. CPI is expected to continue to climb in the coming months.
China releases its Balance of Trade on Monday and Inflation on Tuesday. Both have downside risks given the disruption to business and the collapse in property sales and sentiment due to the covid-zero policy. Restrictions continue tightening in Beijing and the covid-zero policy has become the biggest headwind to a China recovery. The government reaffirmed its commitment to the policy Friday, sending China stocks lower.
Additionally, US-listed China stocks face new delisting risk from US regulators that is weighing on Hong Kong markets especially, where most dual listings live. Negative headlines around Covid 19 or US delisting over the weekend could send China equities sharply lower into the start of the week.
USD/CNY and USD/CNH have now risen from 6.4000 to 6.7000 in just two weeks. The PBOC remains comfortable at this stage, being a back door stimulus to manufacturers. The PBOC USD/CNY fixing will be the key indicator as to whether the authorities have said Yuan depreciation has gone far enough.