Forex Week Ahead: focus on US CPI report, Powell speech and Japan GDP data
The US CPI report released this week is crucial for global financial markets. In addition, statistical data from the Bank of England, the European Central Bank, and the Federal Reserve of Australia will also be the focus.
Key points:
- U.S. producer and consumer price trends will affect the Fed's interest rate movements and market risk sentiment
- Australia's wage growth and unemployment data could boost investor expectations for RBA rate cut
- China's economy will be in focus as recent statistics show demand environment improving
US Dollars
On Monday (May 13th), investors will pay attention to US consumer inflation expectations data. The upward trend of inflation expectations may affect the interest rate path of the Federal Reserve.
However, producer and consumer inflation data has a greater impact on investors' interest rate paths towards the Federal Reserve. These data will be released on Tuesday (May 14th) and Wednesday (May 15th). If the inflation data is higher than expected, it may intensify investors' bets on the Fed's interest rate hike.
Wednesday's retail sales data is also worth considering. The growth trend of consumer spending will drive demand driven inflation and impose a more hawkish interest rate path on the Federal Reserve.
The unemployment benefit application data on Thursday (May 16th) will arouse investor interest. The significant increase in unemployment benefits applications may ease investors' concerns about the more hawkish trajectory of the Federal Reserve's interest rates.
With concerns about inflation, retail sales, and the US labor market, investors should closely monitor the discussions of Federal Reserve members. The views on inflation and monetary policy may cause market fluctuations.
Federal Reserve Chairman Chairman Powell is scheduled to deliver a speech on Tuesday, May 14th. Federal Reserve members Loretta Mester (Monday/Thursday), Philip Jefferson (Monday), Lisa Cook (Tuesday), Neel Kashkari (Wednesday), Michelle Bowman (Wednesday), Michael Barr (Thursday), Patrick Harker (Thursday), Raphael Bostic (Thursday), and Christopher Waller (Friday) will also give speeches.
Euro
On Tuesday, German inflation and economic confidence data will affect buyer demand for euros/dollars. The initial reduction in inflation data may support the European Central Bank's interest rate cuts after June. In addition, the upward trend of the ZEW economic confidence index will be consistent with the expected improvement in the macroeconomic environment.
On Wednesday, the final inflation data for France and preliminary estimates of GDP for the second quarter of the eurozone also need to be considered. These data may affect investors' bets on the European Central Bank's interest rate cut after June.
On Friday, the final inflation data for the eurozone will attract the attention of investors. The revision of preliminary data may affect the interest rate path of the European Central Bank in 2024.
Investors should also pay attention to the comments of the European Central Bank. Members of the Executive Committee of the European Central Bank, Piero Cipollone (Monday), Claudia Buch (Monday), Luis de Guindos (Tuesday/Friday), and Isabel Schnabel (Wednesday), will give speeches. Inflation and economic perspectives may affect the interest rate path of the European Central Bank.
Pound
UK labour market overview report will affect buyer interest in the pound. If the wage growth data is lower than expected and the unemployment rate is higher, it may strengthen market expectations for the Bank of England's interest rate cut in June.
After the Bank of England's monetary policy decision (May 9), investors should consider the Bank of England's comments. Bank of England Chief Economist Huw Pill (Tuesday) and Monetary Policy Committee members Megan Greene (Thursday) and Catherine Mann (Friday) are scheduled to deliver speeches. The reaction to labor market data and views on the Bank of England's rate cut schedule will cause market volatility.
Canadian Dollar
Property sector data will affect buyer interest in the Canadian dollar, with relevant data released on Monday, Wednesday, and Friday. The deterioration of the real estate market may affect consumption and expenditure, leading to a weakening inflationary environment.
Other data released this week include wholesale sales and foreign securities purchases. However, these data are unlikely to affect the interest rate path of Canadian banks.
AUD
On Monday, Australia's business confidence index for April will be the focus. The upward trend of business confidence may indicate an improvement in the macroeconomic environment and support employment growth and wage growth.
However, labor market data has a greater impact on the Australian dollar, and these data will be released on Wednesday and Thursday. If the wage growth data is higher than expected, it may increase investors' bets on the Australian Federal Reserve's interest rate hike. The labor market data for April will also affect market sentiment towards the interest rate path of the Federal Reserve of Australia.
At the Federal Reserve of Australia press conference, Reserve Governor Michele Bullock downplayed the discussion of interest rate hikes. The trend of wage growth may change market expectations.
New Zealand Dollar
On Monday, inflation expectations data will draw investors' attention to the NZD / USD and the New Zealand Fed. If inflation expectations are higher than expected, it may affect the interest rate path of the New Zealand Federal Reserve.
On Tuesday, the sales data of electronic cards in April will attract the attention of investors. The increase in consumer spending will drive demand driven inflation.
On Friday, producer prices are also worth paying attention to.
Japanese Yen
On Tuesday, Japan's producer prices will become the focus of the Bank of Japan and the yen. The Bank of Japan needs demand driven inflation growth to begin discussing interest rate hikes. The upward trend of producer prices will indicate that the demand environment is improving.
On Thursday, the Japanese government will release GDP data for the first quarter of 2024. If there is an economic contraction, it may cause the Bank of Japan to remain cautious in monetary policy.
In addition, investors should also pay attention to comments from the Bank of Japan regarding interest rates and government intervention in Japan.
China
On Friday, China's industrial production, retail sales, unemployment rate and fixed assets investment data will attract investors' attention. Continuous improvement in the demand environment may stimulate demand for risky assets. However, optimistic data may reduce the likelihood of fiscal stimulus plans.
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