The dollar saw broad weakness against the majors last week. NZD, NOK, and SEK outperformed while CHF, CAD, and EUR underperformed. We believe dollar weakness will continue. However, we also continue to believe that the global growth outlook will deteriorate sharply this year and so recent gains in the growth-sensitive major currencies and EM FX is unlikely to be sustainable.

AMERICAS

The attack on Fed independence is intensifying. When asked if removing Powell was an option, National Economic Council Director Hassett, “The president and his team will continue to study that.” Until now, most administration officials have stayed away from this minefield but Hassett seemed to go all in, accusing the Fed of acting in the interests of the Democratic Party. Trump continued to criticize Powell, stressing “I’m not happy with him. I let him know it. And, if I want him out, he’ll be out of there real fast, believe me.”

The admission that this is being studied at all should be taken very seriously and very negatively. Global confidence in U.S. policymakers is already at a very low point after the tariff rollout; getting rid of Powell should be viewed as a Rubicon that cannot be crossed if any shred of confidence in the Fed (and the U.S.) is to be maintained. Fed officials are already circling the wagons. Over the weekend, Chicago Fed President Goolsbee said “There’s virtual unanimity among economists that monetary independence from political interference - that the Fed or any central bank be able to do the job that it needs to do - is really important.” We concur.

The Fed releases its Beige Book report Wednesday. The Beige Book will offer some insights on how recent tariff policy and government layoffs are affecting the economy. The March Fed Beige Book, compiled using information gathered on or before February 24, suggested the barrage of tariff announcement had not yet shaken confidence in the US economy but pointed to upside risks to inflation. Since then, things have only gotten more uncertain and so we expect this Beige book to highlight more tangible impact of the tariffs, with upside risks to inflation and downside risks to growth seen.

Last week’s speech by Powell made it clear that the Fed remains in wait and see mode. Other Fed officials are similarly cautious. Goolsbee speaks Monday. Jefferson, Harker, Kashkari, Barkin, and Kugler speak Tuesday. Kugler, Goolsbee, Musalem, Waller, and Hammack speak Wednesday. Kashkari speaks Thursday. At midnight Friday, the media blackout goes into effect.

The IMF publishes its latest World Economic Outlook April Tuesday. The IMF is expected to downgrade its global growth outlook in response to heightened trade policy uncertainty. We suspect the updated forecasts will confirm that age-old maxim that when American sneezes, the world catches a cold. Simply put, a global trade war will claim many victims. While the knee-jerk response is to call for the end of U.S. exceptionalism, we fear that many other economies will also slow significantly. Global PMI readings this week could be an early sign.

S&P Global reports preliminary April PMIs Wednesday. Manufacturing is expected at 49.3 vs. 50.2 in March, while services is expected at 53.0 vs. 54.4 in March. If so, the composite PMI would likely fall nearly two points from 53.5 in March.

The growth outlook is still mixed. The New York Fed Nowcast model estimates Q1 growth at 2.6% SAAR and Q2 growth at 2.6% SAAR and will be updated Friday. This still greatly contrasts this with the Atlanta Fed GDPNow model, which estimates Q1 at -2.2% SAAR and will be updated Thursday after the data. Q1 has drawn to a close but we won’t get official GDP data until April 30.

Chicago Fed National Activity Index for March will be reported Thursday. The CFNAI firmed in February as headline came in at 0.18 vs. -0.17 expected and a revised -0.08 (was -0.03) in January. As a result, the three-month moving average rose to 0.15 vs. a revised 0.07 (was 0.03) in January. This was the highest since April 2022 and moves further above the -0.7 threshold that typically signals recession. There are still no obvious signs of recession in the hard data yet but with sentiment continuing to plumb new depths, it seems like only a matter of time before the economy slows.

Weekly jobless claims Thursday will be of interest. That’s because initial claims will be for the BLS survey week containing the 12th of the month. There is no Bloomberg consensus yet for April NFP but its whisper number stands at 144k vs. 228k actual in March.

Canada reports February retail sales Friday. Statistics Canada advance estimate indicates headline retail sales decreased -0.4% m/m in February vs. -0.6% in January. Sales ex-autos are expected flat m/m vs. 0.2% in January. Despite weakness in the economy, the Bank of Canada elected to keep rates steady at 2.75% due to ongoing uncertainty regarding the scale and impact of U.S. tariffs. The swaps markets is pricing in 50 bp of total easing over next 12 months that would see the policy rate bottom near 2.25%.

EUROPE/MIDDLE EAST/AFRICA

ECB easing expectations have picked up in the wake of last week’s decision to cut rates 25 bp. The market has nearly priced in a 25 bp cut at the next meeting June 5. Looking ahead, the swaps market is pricing in nearly 100 bp of total easing over the next 12 months that would see the policy rate bottom near 1.25%. Look for the ECB hawks to push back this week against this dovish market pricing. Centeno speaks Monday. Lagarde and Knot speak Tuesday. Knot, Villeroy, and Lane speak Wednesday. Nagel, Lane, Simkus, and Rehn speak Thursday.

ECB wage tracker will be reported Wednesday. Most measures of labor costs in the eurozone have peaked and should allow the ECB to continue easing this year.

Eurozone reports preliminary April PMIs Wednesday. Headline manufacturing is expected at 47.5 vs. 48.6 in March, services is expected at 50.5 vs. 51.0 in March, and the composite is expected at 50.3 vs. 50.9 in March. Looking at the country breakdown, the German composite is expected at 50.6 vs. 51.3 in March and the French composite is expected at 47.6 vs. 48.0 in February. Italy and Spain will be reported with the final PMI readings in early May.

Germany reports April IFO business index Thursday. Headline is expected at 85.2 vs. 86.7, with both current assessment and expectations falling to 85.4 and 85.0, respectively. In March, the IFO index firmed more than expected from the German government spending package. However, the trade war will likely dampen business confidence in April. Indeed, the German ZEW investor economic sentiment expectations index plunged to a 20-month low in April due to the “erratic changes in the US trade policy.”

Bank of England easing expectations have picked up. The market has nearly priced in a 25 bp cut at the next meeting May 8. Looking ahead, the swaps market is pricing in 100 bp of total easing over the next 12 months that would see the policy rate bottom near 3.5%. Chief Economist Pill, Governor Bailey, and MPC member Breeden speak Wednesday. MPC member Lombardelli speaks Thursday. MPC member Greene speaks Friday.

U.K. reports April preliminary PMIs Wednesday. Manufacturing is expected at 44.0 vs. 44.9 in March, services is expected at 51.5 vs. 52.5 in March, and the composite is expected at 50.4 vs. 51.5 in March. If so, the composite would nearly match the cycle low of 50.4 from December.

U.K. also reports March retail sales Friday. Headline is expected at -0.4% m/m vs. 1% in February, while ex-auto fuel is expected at -0.6% m/m vs. 1.0% in February. The y/y rates are expected to slow to 1.8% and 2.0%, respectively. The March BRC retail sales monitor points to potential green shoots in consumer spending activity.

ASIA

Japan highlight will be April Tokyo CPI data Friday. Headline is expected at 3.3% y/y vs. 2.9% in March, core (ex-fresh food) is expected at 3.2% y/y vs. 2.4% in March, and core ex-energy is expected at 2.8% y/y vs. 2.2% in March. If so, Tokyo core would be the highest since June 2023 and would move further above the 2% target. Despite rising price pressures, the Bank of Japan is seen on hold through 2025. Looking ahead, the swaps market is pricing in only 25 bp of tightening over the next three years.

Japan also reports April preliminary PMI Wednesday. The composite fell to 48.9 in March vs. 52.0 in February and was the lowest since November 2022. A significant recovery back above 50 seems unlikely given the deteriorating global outlook.

Australia reports April preliminary PMIs Wednesday. The composite rose to 51.6 in March vs. 50.6 in February and was the highest since August 2024. This rise seems unlikely to be sustained given the deteriorating outlook for regional trade and activity. The RBA is expected to cut rates 25 bp to 3.85% at the next meeting May 20, with 20% odds of a larger 50 bp move. Looking ahead, the swaps market is pricing in 125 bp of total easing over the next 12 months.

New Zealand ANZ consumer confidence index for April will be reported Thursday. In March, consumer confidence dipped 3.2 points to a five-month low of 93.2 and remains below the long-run average of 113.5. Additionally, the proportion of households thinking it’s a good time to buy a major household item, the best retail indicator, eased 1 point to -16, matching the January low. Given ongoing weakness in the economy, the RBNZ is expected to cut rates 25 bp to 3.25% at the next meeting May 28. Looking ahead, the swaps market is pricing in 75 bp of total easing over the next 12 months.