The Week Ahead: The RBA and the BoE in Focus Amidst Shifting Policy Outlooks

The US Dollar

US initial jobless claims for the week ending May 4 will influence buyer demand for the US dollar. After the US Jobs Report, upward trends in jobless claims could support bets on a September Fed rate cut.

On Friday, Michigan Consumer Sentiment numbers for May also warrant investor attention. Weaker consumer confidence could signal downward trends in consumer spending. A pullback in consumer spending could dampen demand-driven inflation and allow the Fed to pursue a more dovish rate path. Investors must also consider the sub-components, including inflation expectations.

After the recent Jobs Report, investors should also monitor FOMC member speeches. Views on inflation, the economic outlook, and the timing of Fed rate cuts could move the dial. FOMC members Williams (Mon), Thomas Barkin (Mon), Neel Kashkari (Tues), Christopher Jefferson (Wed), Austan Goolsbee (Fri), Michelle Bowman (Fri), and Michael Barr (Fri) are on the calendar to speak.

The EUR

On Monday (May 6), Services PMI numbers for Italy and finalized PMIs for France, Germany, and Italy will put the EUR/USD in focus. An improving services sector could impact investor expectations of a July ECB rate cut. The services sector remains an ECB focal point vis-à-vis inflation.

The German economy will be in the spotlight again on Tuesday (May 7) and Wednesday (May 8). German factory orders and trade data warrant investor attention on Tuesday. An improving demand environment would support expectations of an improving macroeconomic environment.

On Wednesday, German industrial production numbers also need consideration.

With the markets betting on a June ECB rate cut, the ECB monetary policy meeting minutes from April will garner investor interest on Friday (May 10).

However, investors should also monitor ECB commentary throughout the week. ECB Executive Board members Luis de Guindos (Thurs), Piero Cipollone (Thurs/Fri), Elizabeth McCaul (Thurs), and Frank Elderson are on the calendar to speak. Views on the ECB rate path beyond June could move the dial.

The Pound

On Tuesday, the BRC Retail Sales Monitor will impact buyer demand for the Pound. Upward trends in the Retail Sales Monitor would signal improving consumer spending trends.

However, house price figures also need consideration on Tuesday. An improving housing sector backdrop could raise consumer confidence and spending trends. The BoE could temper investor expectations of an interest rate cut to curb consumption.

While the numbers will draw interest, the Bank of England monetary policy decision will be pivotal. On Thursday (May 9), economists expect the BoE to leave interest rates at 5.25%. The vote count, the MPC Meeting Minutes, and Bank of the England Governor Andrew Bailey speech will move the dial.

On Friday (May 10), UK GDP, trade, production numbers, and trade data will be in focus. The GDP and production numbers will likely impact the BoE rate path more.

With the Bank of England in focus, investors should track Bank of England commentary. BoE Chief Economist Huw Pill (Thurs/Fri) and Monetary Policy Committee member Sawati Dhingra are on the calendar to speak.

The Loonie

Ivey PMI numbers for April could impact buyer demand for the Loonie on Tuesday (May 7).

However, on Friday (May 10), Canadian labor market data for April will warrant investor attention. Weaker labor market conditions could impact wages and consumer confidence. The Bank of Canada could respond to weak labor market data by discussing interest rate cuts to deliver price stability.

The Australian Dollar

Australian retail sales figures for March will draw investor interest on Tuesday (May 7). Upward revisions to the preliminary numbers could influence the RBA rate path and the Aussie dollar.

However, the RBA interest rate decision will be the focal point for investors. Hotter-than-expected consumer and producer price inflation figures fueled speculation about an RBA rate hike. The markets expect the RBA to leave the cash rate at 5.35%. However, the RBA press conference will garner investor interest.

Other stats include building approvals. However, these will likely play second fiddle to the RBA.

The Kiwi Dollar

On Friday (May 10), Business NZ PMI numbers for April need consideration. Weaker-than-expected numbers could raise bets on an RBNZ rate cut. However, investors should consider the sub-components for trends.

The Japanese Yen

Service sector PMI numbers from Japan will put the Japanese Yen in focus on Tuesday. The Bank of Japan hopes that a pickup in services employment, new orders, and prices could drive inflationary pressures. An upward revision to the preliminary number could influence buyer appetite for the Yen. However, investors should consider the sub-components.

On Friday (May 10), household spending figures from Japan will also draw investor attention. An unexpected increase in household spending could fuel investor bets on a Bank of Japan interest rate hike.

Beyond the numbers, investors should monitor Bank of Japan commentary. Forward guidance on monetary policy would influence near-term trends for the Japanese Yen.

Out of China

On Monday (May 6), the China Caixin Services PMI will warrant investor attention. After the better-than-expected Caixin Manufacturing PMI, an unexpected pickup in service sector activity could fuel buyer demand for riskier assets.

Nevertheless, investors must consider the subcomponents, including new orders and prices.

Trade data for April will attract investor attention on Thursday (May 9). A recovery in imports and exports could signal an improving demand environment and drive buyer demand for the commodity currencies, including the Aussie dollar, the Loonie, and the Kiwi dollar.