The week begins on a light note with a holiday in Europe due to the observance of Whit Monday, and in Canada, it's Victoria Day. In the U.S., some FOMC members are expected to deliver their remarks on Monday and Tuesday.
Also on Tuesday, Australia will release the Westpac consumer sentiment and the monetary policy meeting minutes. Later in the day, Canada will publish its inflation data.
Wednesday's most important event will be the RBNZ monetary policy announcement, along with the CPI data for the U.K. In the U.S., we'll see the release of existing home sales data and the FOMC meeting minutes.
Thursday brings the flash manufacturing PMIs and flash services PMIs for Australia, Japan, the eurozone, the U.K., and the U.S. Additionally, the U.S. will release new home sales data.
Finally, on Friday, the U.K. will report retail sales m/m, as will Canada. The U.S. will release durable goods orders m/m, along with the revised UoM consumer sentiment and inflation expectations.
Last month, the Westpac consumer sentiment declined to 82.4, indicating consumer pessimism. This trend might persist due to uncertainty about the overall economic conditions, slow progress on inflation and the high cost of living resulting from elevated interest rates. The RBA remains concerned about the inflation progress, which is likely to continue affecting consumer sentiment for some time.
The consensus for Canada's m/m CPI is 0.5% compared to the previous 0.6%. For the y/y data, expectations are at 2.7%, compared to the prior 2.9%. The BoC will closely monitor this week's data, as it will be the latest available before their next meeting in June. Special attention will be given to the three-month pace of core inflation, which is expected to remain within the 2% target.
Overall, Canada has made progress on lowering inflation, but if this week's data surprises to the upside, the market may delay expectations for a rate cut until after the June meeting. Conversely, if inflation falls below expectations, there's a higher chance the Bank will choose to act next month with a 25bps cut.
At this week's meeting, the RBNZ is widely expected to maintain its current monetary policy, keeping the Official Cash Rate (OCR) at 5.5%. The Bank is likely to reiterate that the OCR needs to stay at this level for "a sustained period" to achieve the desired inflation target of 1-3%. Recent economic conditions in New Zealand have not been very promising, as reflected by softer GDP data, while the near-term inflation outlook remains elevated following the surprise to the upside in Q1, according to Westpac.
This week's inflation data for the U.K. will be important, as it may provide insights into the timing of the BoE's first rate cut. The market currently anticipates a 25bps cut at the August meeting, though some analysts also suggest June as a possibility. Economists expect the headline CPI y/y to have slowed to 2.1% in April and the core CPI to 3.6%. The BoE has been concerned about persistent high inflation for services. Service inflation is expected to have decreased to 5.4% last month, which remains well above target.
The consensus for the U.K. flash manufacturing PMI is to rise slightly from 49.1 to 49.5, while flash services PMI is expected to drop from 55.0 to 54.7. Both indices have seen improvements in recent months, even though manufacturing remains in contractionary territory.
U.S. durable goods orders are expected to decline by 0.5% in April after previously rising by 0.9% in March. Aircraft orders have seen cancellations recently which will put pressure on the headline print, but without the transportation component, durable goods orders are expected to see a small 0.3% rise.
