Within the next few days we are due to receive economic data releases that could represent an inflection point and shape financial markets over the next few months, and maybe for the rest of the year. In addition, the 'big four' central banks are all due to hold meetings in the next few days-the FOMC, BOJ, ECB, and BOE. I do not expect any dramatic moves or changes of policy but, as ever, post-meeting statements and comments will be key, as will the subsequent releases of meeting minutes.
There is every chance, for instance, that Draghi will foreshadow more easing to come at the next ECB meeting in June, and this could be rendered even more likely should the BOJ move to ease further if it appears that progress towards the 2% CPI target has stalled. More QE in Japan will surely lead the Euro to strengthen against the Yen and Draghi has now made the Euro's foreign exchange strength front and centre. It was extremely telling that he chose to introduce the subject of the Euro's strength very early in the last post-meeting news conference, rather than just reacting to journalists' ever present questions on the subject with the usual platitude about the Euro's value not being a target, just a consideration.
As yet, it is too early to judge how the recent sales tax hike has effected consumption in Japan; all we have so far are April readings for Tokyo's CPI and these numbers came in slightly below expectations. BoJ Governor Kuroda said recently, (speaking about inflation), "But as I have repeatedly said, we would not hesitate to take necessary policy actions if it deviated from the 2% inflation track."
There is every chance we start to see dissent amongst BOE MPC members about continued accommodation at the current levels, but maybe that has to wait for the June or July meetings, or even August, by which time three new faces will have joined the MPC, with the two new external members at least no doubt keen to burnish their credentials as central bankers.
To give you a flavour of how important the next couple of weeks will be, this is a summary of the releases due:
Hopefully now beginning to paint a picture which is free of weather distortions as some, but not all, of these figures will relate to April, including the key employment figures:
March Pending Home Sales, Feb. CaseShiller house price indices, April Consumer Confidence, Q1 Employment Cost Index, Q1 Advance GDP, March Personal Consumption Expenditure price rises, April ISM Manufacturing and Non-manufacturing surveys, April vehicle sales, April Employment Reports.
German and Italian employment reports, Purchasing Managers' Indices across the region, actual CPI figures for Germany and, perhaps the most important Eurozone release of the month, the estimate for April Eurozone CPI.
Multiple housing market surveys, Bank of England net lending secured on dwellings, Q1 Advance GDP, Purchasing Manager Indices.
Retail sales, industrial production, employment report.
Official and HSBC Purchasing Manager Indices, new bank lending, retail sales, industrial production.
My expectations for this prodigious raft of data would be for increasingly robust figures from the US, lackluster Eurozone readings, with further evidence of the approach of deflation, very encouraging UK figures, in fact almost verging on over-heating, middle-of-the-road Japanese news, and stabilisation, maybe improvement, in Chinese data.
Meanwhile markets are treading water, with Ukraine a continuing and significant drag on sentiment. For a car-maker in Detroit, or a software developer in Palo Alto, Ukraine probably seems very distant and irrelevant to their 'animal spirits', but this is not the case for financial markets. I believe that, absent the Ukrainian crisis, US stocks would be maybe 5% higher and 10-yr T-Note yields 15-20 bp higher.
The question for the next two weeks is whether the positive data news can outweigh Ukrainian fears? A difficult call, and maybe to be long of volatility and gamma is the best solution for those not wanting to be left behind by an explosion higher in sentiment, should Ukraine find itself relegated to the inside pages.