The Week Ahead – US CPI Report, the Fed, the ECB, and the BoJ in Focus

On the Macro

It’s a big week ahead on the economic calendar. While the economic indicators will impact the markets, the Fed interest rate decision, the FOMC Economic Projections, and the FOMC press conference will be the focal point.

For the Dollar:

It is a busy week ahead for the Greenback. The US CPI Report gets the week underway. Sticky inflation could refuel bets on a Wednesday Fed interest rate hike.

On Wednesday, we also expect market sensitivity to wholesale inflation numbers due ahead of the Fed interest rate decision. The markets are expecting the Fed to stand pat on monetary policy. However, the CPI Report and wholesale inflation numbers could change the narrative.

A hold on interest rates would turn the focus to the FOMC Rate Statement, Economic Projections, and Interest Rate Projections.

In the second half of the week, initial jobless claims, retail sales, and Philly Fed Manufacturing Index numbers will move the dial ahead of consumer sentiment figures on Friday.

For the EUR:

It’s also a big week for the EUR.

Finalized euro area inflation figures will draw interest throughout the week. We expect the German (Tues), French CPI (Thurs), and the Eurozone (Fri) numbers to garner the most interest.

However, ZEW Economic Sentiment (Tues) and Eurozone industrial production (Wed), and Eurozone trade data (Thurs) will also move the dial ahead of wage growth figures (Fri).

While the numbers will provide direction, the ECB monetary policy decision and ECB Press Conference will be the key driver. Economists forecast a 25-basis point interest rate hike. Barring a surprise move, the Press Conference will be the focal point, with the markets eyeing economic and inflation projections and any forward guidance.

Beyond the numbers, investors should also consider ECB commentary. Executive Board members Luis de Guindos (Fri), Fabio Panetta (Thurs), Andrea Enria (Tues), and ECB President Christine Lagarde (Thurs) are on the calendar to speak.

For the Pound:

It is a busy week ahead for the Pound. The UK Labor Market Overview will draw interest on Tuesday. While unemployment numbers will need consideration, wage growth will have more impact.

On Wednesday, the monthly GDP report will also move the dial. GDP and manufacturing production numbers will likely be the focal points.

With the economic calendar on the heavy side, Bank of England commentary will influence. Bank of England Governor Andrew Bailey (Tues) and Monetary Policy Committee member Sir Jon Cunliffe (Thurs) are on the calendar to speak.

For the Loonie:

It is a quiet week ahead on the economic calendar for the Loonie.

Manufacturing and wholesale sales numbers will draw interest on Thursday and Friday.

While the stats will provide direction, the OPEC monthly report and weekly crude oil inventories will also need consideration.

Out of Asia

For the Aussie Dollar:

It is a relatively quiet week for the Aussie Dollar. However, NAB Business Confidence and employment figures will influence the Tuesday and Thursday sessions, respectively.

We expect the employment numbers to have more impact.

For the Kiwi Dollar:

It’s a busier week for the Kiwi Dollar. Electronic card retail sales figures (Mon) and Q1 GDP numbers (Thurs) will provide direction. Weaker electronic card retail sales and GDP numbers could signal an end to the RBNZ monetary policy tightening cycle.

However, Business PMI numbers for May will also influence on Friday.

For the Japanese Yen:

It is a big week for the Japanese Yen.

While trade data will move the dial on Thursday, the Bank of Japan interest rate decision and press conference will have more impact.

The latest round of economic indicators suggested the need for a policy tweak. However, the Bank of Japan remains committed to ultra-loose. A surprise tweak in forward guidance would sink the USD/JPY on Friday.

Out of China

Investors will need to see more upbeat stats to ease fears of a continued deterioration in the macroeconomic environment.

Fixed asset investment, industrial production, retail sales, and unemployment figures will influence the Thursday session. We expect the industrial production and retail sales numbers to have more impact on market risk sentiment.

However, investors should also consider stimulus chatter that would be a boon for riskier assets.