The data showed a meaningful drop in the unemployment rate, lower than expected job gains and an easing in wage growth (although the data was higher than forecasts).
All in all, the data isn’t urging for rate cuts, so the BoE is more likely to remain neutral. Ahead of the data, the market was pricing in just an 8% chance of a rate hike at the upcoming meeting with a total of 30 bps of tightening expected in 2026.
Looking ahead, we will also get the German ZEW which is expected to drop further to -5 vs -0.5 prior. The data isn’t going to change anything for the ECB though, so the market reaction will likely be muted.
AMERICAN SESSION
In the American session, we have the US Retail Sales data for March and Fed Chair Nominee Warsh confirmation hearing. The Retail Sales M/M is expected at 1.4% vs 0.6% prior, while the Ex-Autos M/M is seen at 1.4% vs 0.5% prior. The Control Group M/M is expected at 0.2% vs 0.5% prior.
Retail Sales is a market-moving release but the reaction is usually faded due to the volatile nature of the data. The data isn’t going to change anything for the Fed, so the market reaction will likely be muted.
We also have Fed Chair Nominee Warsh confirmation hearing. This is likely to be a non-event as it won’t have any impact on current growth, inflation or interest rates expectations which are mainly driven by the US-Iran headlines at the moment, and will likely continue to do so until the war is officially over.
Warsh might not get confirmed today as Senator Tillis has vowed to block Fed nominees until the DoJ investigation into Powell is resolved or dropped. If Warsh isn’t confirmed by May 15, 2026, Powell has already explicitly stated that he intends to remain as Chair pro-tempore until a nomination is confirmed.
Having said that, the market focus remains solely on the US-Iran negotiations. Talks are expected to start on Wednesday in Islamabad. Trump has already shifted the ceasefire deadline from today to tomorrow at midnight allowing for an extra 24 hours of talks before he chooses whether make good on his threat to blow up Iranian bridges and power plants
