FOREX: AUDUSD Rises Above 0.6450 Amid Surging Equities/Softer Greenback

The National Retail Federation (NRF) forecasts core retail sales growth of between 2.7-3.7% in 2025 (ex-auto dealers, gas stations, restaurants). That wide fairly wide range would either represent steadiness (at the high end) with the 3.6% in 2024 - which was exactly in line with the pre-pandemic annual average (2010-2019) - or, at the low end, marking a notable slowdown to the weakest since 2016. The 2024 outturn was in line with their forecast.

• Much of the 2025 outturn will depend on the performance of the economy of course: the NRF forecasts GDP growth of just under 2% this year, vs 2.8% in 2024. They also expect PCE inflation to remain steady, at 2.5% for the year, despite the imposition of tariffs. Both of those figures look optimistic versus consensus at this stage.
• While the NRF recognizes the potential impact from tariffs ("We have factored higher inflation, slower job growth and slower economic activity into our modeling. The significant policy uncertainty from numerous factors is implied by the range of our forecast."), NRF Chief Economist Jack Kleinhenz notes: “It’s the hard data on employment, income and tariff-induced inflation — not consumer sentiment — that supports our view of a slower trajectory for consumer spending...consumer fundamentals remain intact, supported by low unemployment, slower but steady income growth, and solid household finances. Consumer spending is not unraveling".
• As we've noted, the "hard" retail data have remained solid even as sentiment has collapsed in recent months.

Wednesday's Europe rates/bond options flow included: 

• OEK5 118.00/118.50cs sold at 22.5 in 10k
• ERJ5 with ERK5 97.75/97.6875ps vs 98.00c, bought the ps strip for half in 2k
• SFIZ5 96.75/97.25cs, bought for 3.75 in 2k
• SFIZ5 96.20/96.30cs vs 95.75/95.65ps, bought the cs for 2 in 2.5k

Swiss March CPI (due 07:30 BST / 08:30 CEST tomorrow) is expected to accelerate by 0.1pp to 0.4% Y/Y. Core inflation is expected unchanged at 0.9%. 

• A March CPI print in line with consensus would bring average Q1 inflation in line with the recent SNB conditional inflation forecast of 0.4%.
• The analysts' survey for tomorrow's release appears rather wide, with consensus slightly skewed to the upside, with the average estimate standing at 0.43% and the mode standing at 0.5%.
• UBS give some colour on their 0.4% Y/Y headline estimate: "We expect food inflation to rise 0.6pp to 0% y/y, more than offsetting a 0.6pp decline in energy inflation (to -7% y/y). We expect our definition of core inflation (headline excluding energy and food) to stay unchanged at 1% y/y. We think that on balance the risk to our forecast is skewed to the downside"
• Goldman Sachs meanwhile see mid-term Swiss CPI lower than the SNB, at 0.3% in 2025 and 0.6% in 2026 - which, in conjunction with their assessment of Swiss growth prospects being a bit fragile, led them to re-iterate their call for another 25bp cut at the next meeting in June in a recent note.
• Looking at the FX space, EUR strength today has elevated EURCHF closer to levels of 0.96 - we highlighted the significance of the recent 0.95 breakout point here.