The economic calendar is a data junkie’s delight today. The release of retail sales and unemployment figures are scheduled at 10:00 followed by the MPC's decision on rates later in the day, and the communiqué and inflation report at 16:00. Due to the healthy growth in wages and relatively strong industrial output figures last month, we expect fairly strong sales results for March, at 11.5% y/y, which might be slightly negative for bonds in the morning. At the same time, last week’s surprisingly healthy output performance together with the strong job market data, dimmed any remaining hopes for an early rate cut by the MPC, hence the decision should be quick and predictable this time around.
From this perspective, it will be interesting to hear what the MPC has to say in the afternoon – we expect a fairly dovish communiqué which will not block the way to more monetary easing. At the same time, the new inflation projection should be similar or marginally softer, than the one released in January. If so, this would be good news for bonds ahead of the upcoming long weekend.