US: This week's Federal Reserve communications will be very closely watched

Hard economic data out of the US continues to show resilience compared to the sentiment surveys. The US payrolls surveys published last week were conducted just one week after "Liberation Day", so they may not show the full damage just yet.

However, they remained solid, showing continued moderate job creation and a steady unemployment rate just above 4%. On the other hand, the more recent, but also more volatile, jobless claims number showed an uptick, although still remained at low levels. Other numbers, such as first quarter GDP (-0.3%), are distorted by massive pre-ordering to avoid the tariffs, so the picture remains cloudy.

This week's Federal Reserve communications will be very closely watched.

 There will be no updated “dot plot”, but market participants will be monitoring Powell’s comments on the recent uptick in inflation expectations and the drop in sentiment.

 A hawkish tone that indicated no rush to adjust policy settings would be taken as a stance of defiance against intense pressure from President Trump, and could provide the dollar with a leg up this week.