The Week Ahead: Private Sector PMIs, the BoE and the RBA in Focus

The US Dollar

On Monday (June 17), NY Empire State Manufacturing Index numbers will put the US dollar in focus. An unexpected fall could influence investor expectations of a soft landing.

Retail sales figures for May will warrant investor attention on Tuesday (June 18). A larger-than-expected rise in retail sales may impact investor bets on a September Fed rate cut.

US jobless claims will garner investor interest on Thursday (June 20). Another increase in initial jobless claims would signal a deteriorating macroeconomic environment. Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income could impact consumer spending and dampen demand-driven inflation.

On Friday (June 21), private sector PMI numbers for June also need consideration. The Services PMI will likely influence buyer appetite for the US dollar more. The services sector accounts for over 70% of the US economy and contributes to inflation. However, investors should consider the sub-components, including employment and prices.

Beyond the numbers, investors should monitor FOMC Member commentary. FOMC members Austan Goolsbee (Tues) and Thomas Barkin (Thurs) are on the calendar to speak. Comments relating to inflation and the interest rate trajectory could move the dial.

The EUR

On Monday, wage growth and consumer inflation expectation figures for the Eurozone will influence buyer demand for the EUR/USD.

Softer wage growth figures could raise investor expectations of a July ECB rate cut. Wage growth remains a concern for the ECB. Slower wage growth could reduce disposable income and consumer purchasing power. Moreover, downward trends in consumer inflation expectations would fuel bets on a July rate cut.

Finalized inflation figures for the Eurozone and economic sentiment numbers for Germany and the Eurozone will be in focus on Tuesday. Better-than-expected ZEW Economic Sentiment numbers would support buyer appetite for the EUR. However, downward revisions to inflation numbers may influence the EUR more on higher expectations of a July rate cut.

German producer price numbers and consumer confidence figures for the Eurozone warrant investor attention on Thursday. Better-than-expected producer prices would signal an improving demand environment. Producer prices are leading indicators of consumer prices. Upward trends in consumer confidence could also influence the ECB rate path and near-term EUR/USD trends.

On Friday, preliminary private sector PMI numbers for France, Germany, and the Eurozone will impact buyer demand for the EUR. Weaker-than-expected Services PMIs could fuel investor expectations of a July ECB rate cut. Investors should consider the sub-components, including input prices.

Furthermore, investors should monitor ECB commentary. ECB President Christine Lagarde (Fri) and Chief Economist Philip Lane (Tues/Fri) are on the calendar to speak. ECB Executive Board members Claudia Buch (Tues/Wed), Frank Elderson (Tues), Anneli Tuominen (Wed), Isabel Schnabel (Wed/Fri), Luis de Guindos (Wed/Fri), and Elizabeth McCaul (Wed) will also deliver speeches.

Reactions to the economic data, comments regarding the timing of an interest rate cut, and views on the French election need consideration.

The Pound

On Wednesday, UK inflation figures for May will put the Pound and the Bank of England in the spotlight.

Softer-than-expected inflation numbers could fuel investor expectations of an August Bank of England interest rate cut. The Pound will likely show increased sensitivity to the stats with the BoE delivering its monetary policy decision on Thursday.

Investors expect the BoE to stand pat on Thursday, giving the Monetary Policy Meeting Minutes more weight.

On Friday, UK retail sales and private sector PMIs will impact buyer demand for the Pound. A jump in retail sales and pickup in service sector activity could pour cold water on hopes of a summer BoE rate cut.

The Loonie

Housing sector data from Canada may influence buyer appetite for the Loonie. The Canadian housing sector accounts for less than 10% of the Canadian economy. Nevertheless, the housing market may affect consumer confidence and spending.

However, retail sales figures (Fri) for April could influence the Loonie and the Bank of Canada rate path more. Higher-than-expected retail sales figures could temper bets on a near-term second interest rate cut.

Beyond the economic calendar, oil price trends and supply/demand dynamics also need investor consideration.

The Australian Dollar

On Monday, Australian labor market data and consumer inflation expectations will influence buyer appetite for the Aussie dollar.

Downward trends in consumer inflation expectations and weaker labor market conditions could raise investor bets on a 2024 RBA rate cut.

The RBA interest rate decision and press conference will impact buyer demand for the AUD/USD on Tuesday. Economists expect the RBA to stand pat on monetary policy. Barring a surprise, the press conference will have more weight. Investors should consider comments regarding the Australian labor market, inflation, and RBA monetary policy.

On Friday, Australian preliminary private sector PMIs will also need consideration. The Services PMI will likely impact the AUD/USD more, accounting for over 60% of the Australian economy. Furthermore, investors should consider the sub-components, including input prices and employment.

The Kiwi Dollar

On Thursday, Q1 2024 GDP and Q2 2024 consumer confidence figures will influence buyer appetite for the NZD/USD pairing.

Better-than-expected GDP numbers and a pickup in consumer confidence could leave the RBNZ in a holding pattern vis-à-vis monetary policy.

On Friday, credit card spending numbers will also garner investor attention. Downward trends in consumer spending could dampen demand-driven inflation and raise bets on a near-term RBNZ rate cut.

The Japanese Yen

On Monday, machinery orders from Japan will put the Japanese Yen in the spotlight. A slump in machinery orders could signal a deteriorating macroeconomic environment and force the Bank of Japan to hold interest rates steady over the near term.

On Wednesday, trade data for May will give the markets another look at the demand environment. Exports contributed to the Q1 2024 economic contraction. Higher-than-expected exports could paint a rosier picture of the Japanese economy.

Furthermore, inflation and private sector PMIs will warrant investor attention on Friday. The Bank of Japan hopes the services sector will fuel demand-driven inflationary pressures. A larger-than-expected fall in the Services PMI and softer inflation numbers could impact investor bets on a near-term BoJ rate hike.

Out of China

On Monday, industrial production, fixed asset investment, retail sales, and unemployment numbers from China will influence market risk sentiment. The retail sales and industrial production numbers will likely impact the market risk appetite more, barring an unexpected rise in the unemployment rate.

Beyond the data, the PBoC will also be in focus. On Monday, the PBoC will announce the 1-year MLF before setting loan prime rates on Thursday. Unexpected cuts to the 1-year MLF and loan prime rates could drive buyer demand for riskier assets.