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US inflation jumped in April, and this week’s CPI data from the eurozone and Canada is also expected to show an increase in inflation.

The euro rally petered out, as EUR/USD was down slightly last week. The Canadian dollar posted small gains last week, as USD/CAD ended the week just above the 1.21 level. GBP/USD recorded strong gains for a second straight week. The pair rose 0.79%, closing the week just shy of the 1.41 level. 

In the UK, GDP for Q1 slipped by 1.5%, close to the estimate of -1.6%. However, the March GDP report was positive with a healthy gain of 2.1%, above the consensus of 1.5%. Manufacturing Production rose 2.1% in March, an eight-month high and above the forecast of 1.0%. German inflation came in at 0.7%, confirming the initial estimate.

Last week’s major story was the surge in US inflation in April, which was much stronger than anticipated. Headline CPI (YoY) climbed 4.2%, up from 2.6% beforehand. PPI also climbed sharply, with a gain of 6.2%, up from 4.2% beforehand. Despite the sharp jump in inflation, the Federal Reserve reiterated that there are no plans to taper the massive stimulus program.

US Retail Sales for March (MoM) disappointed. The headline reading slowed to 0.0%, down from 9.8% in the previous release and shy of the estimate of 1.0%. Core Retail Sales contracted by 0.8%, down sharply from 8.4% and shy of the forecast of 0.5%.

1. Eurozone GDP: Tuesday, 9:00. The eurozone economy contracted by 0.6% in Q4, its third decline in four quarters. Another decline of 0.6% is expected in the first quarter.
2. Eurozone inflation Report: Wednesday, 9:00. We are seeing increasing inflationary pressures in the eurozone, which could force the ECB to reevaluate its ultra-accommodative monetary policy. Eurozone headline CPI has been rising and is expected to reach 1.6%, up from 1.3%. However, core CPI is forecast to tick lower to 0.8%, down from 0.9%.
3. Canada CPI Report: Wednesday, 12:30. Headline CPI (YoY) is expected to rise to 4.3% in April, up from 3.2%. BoC Core CPI, the central bank’s preferred gauge, is projected to rise to 1.3%, which is slightly lower than the March read of 1.4%.
4. FOMC Meeting Minutes: Wednesday, 18:30. The Fed has insisted that no changes are afoot with regard to policy, despite the surge in inflation. Investors will be closely monitoring the minutes to see if this script is reiterated. Any hint of a tightening in policy could send the US dollar higher.
5. Canada ADP Employment Report: Thursday, 12:30. The March ADP report indicated that the economy created 634 thousand new jobs, an outstanding number. Will we see another sharp gain in April?
6. Bank of Canada Financial System Review: Thursday, 15:00. The Bank of Canada publishes its overview of the financial system twice a year. Apart from data about the bank’s situation, the publication also includes economic data.
7. US Manufacturing PMI: Friday, 13:45. Manufacturing remains well into expansionary territory and the March PMI improved to 60.5 (revised lower from 60.5). Another strong release is expected in April, with a forecast of 60.4 points.