Citi Wealth Insights

USD: With markets fully attentive to the US inflation outlook, Citi analysts expect another month of a strong 0.3% rise in US April core CPI with risks of a 0.4% print as prices still firm in key components like rents, likely to be more sustained. The theme of April’s US data so far has been one of increasingly binding supply constraints pushing prices higher. Another upside surprise in core CPI would be further confirmation of inflationary pressures building in the US economy.

GBP: As expected, pro-independence parties win a substantial majority in last week's Scottish elections but the main pro-independence party (the SNP) falls just short of an overall majority, winning 64 seats out of 129. Conservatives remain the second-largest party, while both Labor and the Liberal Democrats lose support.

With help from Friday’s “mere” quarter million job gains, long-term US yields have risen only half as much as they did in the immediate aftermath of the Global Financial Crisis. Citi analysts believe the largest reason yields have not risen faster is the near-record level of COVID-19 infections globally, in spite of vaccine success in developed markets. In Citi’s view, it is only a matter of time and vaccinations before the global recovery accelerates and Citi analysts expect bond yields to reflect a substantial change in economic activity.

CitiFX House views and Strategy as at May 10, 2021

USD: The US economy adds just 266K jobs in April, well below the 1mln consensus (and Citi at 1.15mln) and the previous month is also revised down from 916K to 770K.

GBP: BoE keeps all policy settings unchanged (Bank Rate at 0.1% unchanged, unanimous, corporate bond purchases unchanged at 20bn, unanimous and Gilts purchases of GBP875bn unchanged but with a 8-1 vote as Andy Haldane dissents, though this is largely inconsequential as he leaves after the next meeting).