On Monday, the U.K. observes a bank holiday in honour of the coronation of King Charles III.
Moving on to Tuesday, the Westpac Consumer Sentiment report for Australia will be released, and a few Federal Reserve members are expected to deliver remarks.
Wednesday brings the most important event of the week: The CPI data for the U.S. Additionally, SNB Chairman Jordan is scheduled to speak about the current challenges of monetary policy at the University of Applied Sciences in Switzerland. Although no significant announcements are expected from the event, it is still worth keeping an eye on as he's known to sometimes make surprising comments that cause volatility .
Thursday's calendar includes the Bank of England monetary policy report, MPC official bank rate votes, monetary policy summary, and official bank rate. BoE Governor Bailey will also deliver a speech. The U.S. will release the Core PPI m/m and PPI m/m data, as well as the unemployment claims report.
Finally, on Friday, New Zealand will publish the inflation expectations q/q report, the U.K. will get the GDP m/m report, and the U.S. will release the Prelim UoM Consumer Sentiment and Prelim UoM inflation expectations data.
According to consensus expectations, the CPI data for the U.S. economy is anticipated to show a rise in headline inflation by 0.4% in April, with the year-over-year rate also projected to increase by 0.2ppts to 5.2%. This suggests that the inflation data continues to remain high, exceeding the Fed's target rate, and may result in high rates for a longer period.
As expected, the Fed hiked interest rates by 25 basis points last week. Some analysts believe that this could be the last hike from this tightening cycle.
This week's BoE meeting is widely anticipated to result in a 25bps increase in the official bank rate, according to a Reuters poll in which 55 out of 56 analysts surveyed voted for such a move. However, the meeting may still have a dovish tone. During the previous meeting, the members opted to keep forward guidance which states that further hikes are possible if pressure continues due to high levels of inflation. Meanwhile, year-over-year data shows that inflation remains above forecast at 10.1%, and while the labor data saw minor improvement, economic growth stayed flat.
Gov Bailey is expected to reiterate that future hikes are on the table if inflation remains persistent, but it's also possible that the Bank will pause to assess the effectiveness of the current monetary policy.
This week, the unemployment claims will be a significant indicator to monitor as it may provide insights into the labor market's tightness. Despite the NFP data showing a positive surprise on Friday, the labor market has experienced some downward revisions for February and March, making April's gains less impactful.
The PPI data is expected to soften, more so than consumer price data, which indicates that supply issues are easing and commodity prices are lowering, according to Citi. Some PPI components, such as trade and transportation services are expected to still experience some weakness.
Expectations for the inflation data in New Zealand suggest that even if it's likely that inflation will remain high there are signs that its growth has somewhat flattened.
The U.K. GDP data for the last quarters exceeded analysts' expectations, given the high inflation and rising interest rates. It is expected that this week's data will show a small increase as well, with the consensus being a 0.1% gain m/m.
Regarding the U.S. UoM Consumer Sentiment, some minor easing is likely, but the 1Yr inflation expectations will likely remain elevated at 4.6%. However, according to Citi, the Fed usually looks at the 5-10Yr inflation expectations which have stayed in the 2.8-3% range.
USD/CAD expectations
The CAD ended the week on a positive tone that's likely to continue this week. On the H1 chart the pair looks good for selling opportunities. A correction is expected until the 1.3580 level of resistance and if that level holds, the next target could be 1.3270.
On the upside next resistance levels are at 1.3550 and 1.3645.
This article was written by Gina Constantin.
