The Week Ahead: The US CPI Report, The FOMC Projections, and The Press Conference

The US Dollar

On Wednesday, US inflation numbers for May will put the US dollar and the Fed in the spotlight. After labor market data for May, a pickup in inflationary pressures could affect investor expectations of multiple 2024 Fed rate cuts.

However, the US CPI Report will precede the June Fed interest rate decision, FOMC economic projections, and the FOMC press conference.

Economists expect the Fed to stand pat on Wednesday, giving the FOMC economic projections and press conference more significance.

US labor market data will need consideration on Thursday. Another increase in initial jobless claims could support expectations of a September Fed rate cut.

However, US producer price figures will also attract investor attention on Thursday. Inflation remains a concern among FOMC members. Downward trends in producer prices could signal a softer demand-driven inflation outlook.

On Friday, preliminary Michigan Consumer Sentiment figures will garner investor interest. Rising expectations of a Fed rate cut could support consumer confidence and ease concerns about a hard US landing.

Beyond the numbers, investors should monitor FOMC member speeches after the Fed interest rate decision. FOMC members John Williams (Thurs) and Austan Goolsbee (Fri) are on the calendar to speak. Views on the economic outlook, inflation, and interest rates could move the dial.

The EUR

On Wednesday, finalized inflation numbers from Germany may influence buyer appetite for the EUR/USD. During the ECB Press Conference, ECB President Lagarde stated inflation risks were higher. Upward revisions to inflation numbers for May could sink investor expectations of a July ECB rate cut.

Industrial production figures for the Eurozone will draw investor interest on Thursday. A pickup in production would align with expectations of an improving macroeconomic environment.

On Friday, investors should also consider German wholesale numbers, French inflation figures, and trade data for the Eurozone.

A less marked decline in wholesale prices and an upward revision to French CPI numbers could impact the EUR/USD more.

The Pound

The UK Labor Market Overview Report will put the investor focus on the Pound and the Bank of England on Tuesday. Softer wage growth figures and a higher unemployment rate could support multiple 2024 Bank of England rate cuts.

On Wednesday, the monthly GDP Report also needs consideration. A pickup in economic activity could counter rising bets on multiple 2024 BoE rate cuts.

Beyond the numbers, investors should monitor Bank of England commentary. Views on inflation, the economic outlook, and the BoE interest rate path could move the dial.

The Loonie

Building permit figures for April could influence buyer appetite for the Loonie. Housing contributes less than 10% to the Canadian economy. Nevertheless, deteriorating housing market conditions may affect consumer confidence/spending and demand-driven inflation.

Softer inflation forecasts could support further Bank of Canada interest rate cuts.

Investors should also consider Bank of Canada speeches, with Governor Macklem and Deputy Governor Kozicki on the calendar to speak on Thurs. Views on the BoC interest rate trajectory will garner investor interest.

The Australian Dollar

On Tuesday, Australian business confidence figures could influence buyer appetite for the Aussie dollar. Weaker business confidence would reflect a deteriorating macroeconomic environment and a cut in spending. Cost-cutting exercises could impact the Australian labor market.

Australian consumer confidence and labor market data will warrant investor attention on Thursday. A continued decline in consumer confidence could signal a pullback in consumer spending. Downward trends in consumer spending may dampen demand-driven inflation and raise bets on an RBA rate cut.

However, labor market conditions and wage growth trends are pivotal. A larger-than-expected fall in the Australian unemployment rate could temper investor bets on a 2024 RBA rate cut.

On Friday, consumer inflation expectation numbers also need consideration. Inflation remains a bugbear for the RBA. Expectations of a higher inflation rate could signal a more hawkish RBA rate path and drive buyer demand for the Aussie dollar.

The Kiwi Dollar

On Thursday, electronic card retail sales will influence buyer appetite for the NZD/USD pairing. Another fall in electronic card retail sales could signal a softer inflation outlook and allow for a more dovish RBNZ rate path.

Business PMI numbers also need consideration on Friday as investors assess the macroeconomic environment.

The Japanese Yen

On Monday, finalized GDP numbers from Japan will put the Japanese Yen in focus. Downward revisions to the preliminary numbers could influence sentiment toward a 2024 Bank of Japan rate hike.

Machinery orders will also garner investor interest on Tuesday.

However, producer price figures for May will likely impact the USD/JPY more as investors shift their focus to the Bank of Japan interest rate decision.

On Friday, investors expect the Bank of Japan to leave interest rates unchanged. Barring a surprise BoJ interest rate hike, the focus will be on the monetary policy statement and press conference.

Out of China

On Wednesday, inflation figures from China will influence market risk sentiment. Upward trends in consumer prices and less marked declines in producer prices could signal an improving demand environment.

Upbeat numbers could drive buyer demand for riskier assets and commodity currencies, including the Aussie and Kiwi dollars.