The Week Ahead: Central Bankers, Services PMIs, and UK Inflation in Focus

The US Dollar

On Wednesday (May 22), US housing sector data will put the investor focus on the US economy. Improving housing market conditions could fuel housing sector inflation, a focal point for the Fed. Improved conditions in the housing sector could boost consumer confidence and stimulate spending.

US jobless claims and preliminary private sector PMI numbers will warrant investor attention on Thursday (May 23). The Services PMI may impact the US dollar more. A contraction across the US services sector could raise investor expectations of a Fed rate cut.

On Friday (May 24), core durable goods orders and the Michigan Consumer Sentiment and Inflation Expectations Indexes need consideration. Upward trends in consumer confidence and inflation expectations could temper investor bets on a September Fed rate cut.

While the numbers will impact buyer demand for the US dollar, FOMC member chatter and the minutes could influence more. Fed Chair Powell is on the calendar to speak on Sunday (May 19), setting the tone for the week.

However, investors must also monitor speeches from FOMC members Raphael Bostic (Mon/Tues/Thurs), Christopher Waller (Mon/Tues/Fri), John Williams (Tues), and Loretta Mester (Tues). The Fed will release the FOMC Meeting Minutes on Wednesday.

The EUR

On Monday (May 20), German producer price numbers for April will impact buyer demand for the EUR/USD. Downward trends in producer prices could signal a softer demand environment, supporting a June ECB interest rate cut.

Trade data for the Eurozone will also need consideration on Tuesday (May 21). Economists expect the Eurozone economy to improve in H2 2024. Upbeat trade data could support a more optimistic outlook.

Preliminary private sector PMI numbers for May will warrant investor attention on Thursday (May 23). Investors should consider the sub-components, including prices, new orders, and employment. Softer input price trends and slower-than-expected service sector activity could raise investor bets in post-June ECB rate cuts.

On Friday (May 24), the German economy will be in focus, with Q1 2024 GDP numbers likely to impact buyer demand for the EUR.

Beyond the numbers, Investors should monitor ECB chatter. ECB President Christine Lagarde is on the calendar to speak on Wednesday (May 22). ECB Executive Board member Isabel Schnabel (Fri) is also on the calendar to speak.

Views on inflation, the economic outlook, and the post-June interest rate path could move the dial.

The Pound

On Wednesday (May 22), UK inflation figures for April will impact buyer demand for the Pound. Softer-than-expected inflation numbers could raise investor bets on a June Bank of England rate cut.

Preliminary private sector PMI figures for May also need consideration on Thursday (May 23). The Services PMI will draw more interest, accounting for over 70% of the UK economy. Upbeat numbers could test investor bets on a June BoE rate cut. Investors must also consider the sub-components, including prices, new orders, and employment.

On Friday, UK retail sales will be in focus. A pullback in retail sales could signal a softer demand-driven inflation outlook.

Beyond the numbers, investors should track BoE commentary. Bank of England Governor Andrew Bailey is on the calendar to speak on Tuesday (May 21) and Thursday (May 23). Monetary Policy Committee members Ben Broadbent (Mon) and Sarah Breeden (Wed) are on the calendar to speak. Reactions to the recent GDP numbers, inflation figures, and the Services PMI would move the dial.

The Loonie

April inflation figures will put the Loonie and the Bank of Canada under the spotlight on Tuesday. Weaker-than-expected inflation numbers could raise expectations of a BoC interest rate cut. However, retail sales figures also need consideration on Friday. Downward trends in consumer spending could further influence sentiment toward the BoC interest rate trajectory.

Other stats include housing sector data. However, house price figures will likely play second fiddle to the inflation and retail sales data.

The Australian Dollar

The RBA Meeting Minutes will influence buyer appetite for the Aussie dollar. Softer-than-expected wage growth figures reduced investor expectations of an RBA interest rate cut. The RBA Meeting Minutes will give further views on the RBA focal points vis-à-vis monetary policy goals.

The Kiwi Dollar

On Wednesday, the RBNZ and the NZD/USD will be in focus. The RBNZ interest rate decision, rate statement, monetary policy statement, and press conference will move the dial. Barring a surprise RBNZ policy move, the press conference will likely impact the NZD/USD more.

Retail sales figures for Q1 2024 also need consideration on Thursday.

The Japanese Yen

On Wednesday, trade data will impact buyer demand for the Japanese Yen. After the larger-than-expected contraction in the Japanese economy, economic indicators for Q2 could influence the Bank of Japan rate path.

The Services PMI will warrant investor attention on Thursday, with the BoJ eyeing the services sector as a source of inflationary pressures.

On Friday, inflation figures for Japan also need investor consideration. Upward trends in consumer prices could refuel investor bets on an H1 2024 BoJ interest rate hike.

Out of China

On Monday, the People’s Bank of China (PBoC) will be in focus. The PBoC will announce the 1-year and 5-year loan prime rates for May. A surprise cut in the 1-year or 5-year LPRs could drive buyer demand for riskier assets.