USD: US GDP and PCE figures this week Weekend news has helped ease market-perceived geopolitical risk, and sentiment is generally supported across asset classes as the week starts. All interested parties appear to have chosen the path of downplaying the size and consequences of Friday’s Israeli strikes in Iran. Bent trading below $90/bbl signals that fears of a broader conflict in the region have abated. Another important piece of news for geopolitics was the approval by the US House of the much-debated $95 aid package for Ukraine, Israel and Taiwan. The implications for risk sentiment aren’t as clear here, as the latest developments in the Russia-Ukraine conflict have not seemed to drive market moves recently. A less volatile geopolitical scene also paves the way for a return of data as the main market driver. There are two major releases in the US this week. GDP growth is widely expected to have slowed in the first quarter – and when the advanced numbers are published on Thursday, we expect a 2.6% quarter-on-quarter annualised print, slightly above the 2.5% consensus. As for March’s core PCE deflator out on Friday, we are calling for a consensus 0.3% month-on-month. That is lower than core CPI (0.4%), where housing has a greater weight, but still too high for the Federal Reserve to revamp the narrative of an imminent rate cut. Remember that PCE is the Fed’s favourite measure of inflation. We have entered the blackout period for policy comments ahead of the 2 May FOMC meeting, but it is now largely expected that the Fed will need to scale back some of its dovish narrative as inflation and jobs both surprised on the upside. The latest comments from most members (including Chair Jerome Powell) have stressed patience, and market expectations should converge towards a return of a simpler data-dependent approach as opposed to the moderately dovish quasi-guidance we had seen until April.