Following a historically volatile week for markets, investors will face a flurry of Fed speak this week as well the latest batch of inflation data. The Trump Administration's tariff announcements have meaningfully altered the economic outlook should they remain in place. The US tariff rate now stands around 25%, the highest since the early 1900s. Should these measures remain in place for a significant period of time, they could potentially shave 1 - 1.5 percentage points from growth this year – meaningfully raising recession risks – while adding a broadly similar amount to core PCE inflation. Inflation will be the main focus of this week's data docket with Thursday's CPI and Friday's PPI providing a snapshot of where trends were prior to the implementation of last week's sweeping trade policy changes. We expect core CPI at 0.28% MoM & headline CPI came at 0.09% MoM due to 6% fall in gasoline prices. The components of PPI which go into core PCE calculation also were muted in March and hence we expect core PCE at .14% MoM against Feb's .37% reading. But Fed can ignore this data as the 2nd April reciprocal tariff impact is yet to move to core PCE. We have auction of 119 BN USD total of 3,10 & 30 year USTS. 9th April is the day when individual countries reciprocal tariffs go into effect. We expect US equities to test 4800 and consolidate around same levels. In RoW, we now expect ECB to cut rates by 25 bps in it's 17th April meeting and the June meeting as well. Our terminal rate expectation for Eurozone is now 2% instead of the earlier 2.25% as Eurozone growth falters amid falling inflation due to lower energy prices as well as likely Chinese dumping of cheap goods.
