Below are the most important global events likely to affect FX and bond markets in the coming week starting May 6.
Central bank decisions in Australia and the U.K. will likely take center stage, though investors will continue to watch any signals from the U.S. regarding the possible timing of an interest-rate cut in the world's largest economy, which increasingly looks likely to be pushed out until later this year.
In Australia, debate is mounting about whether policymakers have done enough to rein in inflation, while focus in the U.K. will be on how soon rates are likely to be reduced. Meanwhile, Sweden's Riksbank could be the next major central bank to start cutting interest rates when it announces a decision on Wednesday.
Malaysia's central bank announces a decision too, with most bets leaning toward an extended pause as pushed-back expectations of U.S. rate cuts delay easing timelines in Asia.
In Asia, first-quarter growth data from Indonesia and the Philippines, plus inflation and trade data figures from China, will also be on tap in another week peppered with regional holidays.
Investors will continue to watch any moves in the Japanese yen after Japanese authorities began intervening to support the currency after it tumbled to 34-year lows against the dollar.
Eyes will also be on China's President Xi Jinping visit to Europe.
U.S.
Markets have significantly scaled back their expectations for interest-rate cuts by the Federal Reserve since the start of the year due to inflation staying persistently high.
Still, the next move is still expected to be a cut, with Chair Jerome Powell suggesting at the Fed's meeting on May 1 that the bar for a switch toward hiking rates was high.
This week is fairly quiet in terms of data, but Friday's University of Michigan preliminary consumer survey for May could be a key up-to-date indicator of whether the U.S. economy continues to perform strongly. Comments by Federal Reserve policymakers will also be closely watched.
"After the last three inflation prints surprised to the upside, the timing of possible interest rate cuts has been postponed to the future, especially as the economy continues to perform quite well. Inflationary pressure is likely to ease only slightly, at least in the coming months," said Commerzbank economist Christoph Balz in a note.
This could mean a first 25 basis-point rate cut won't arrive until December, he said.
CANADA
Key Canadian jobs data for April are due on Friday.
Recently, Bank of Canada Governor Tiff Macklem told lawmakers there is a limit to how much BOC policy can diverge from the Federal Reserve, while Capital Economics said in a note that weakness in the Canadian dollar could restrain the BOC from cutting rates enough to help lackluster activity.
EUROZONE
Data in the coming week will be watched for further confirmation that the eurozone economy is on the road to recovery following data showing stronger-than-expected first-quarter gross domestic product, with a quarterly growth rate of 0.3%.
Final services purchasing managers' indexes for the eurozone, Germany and France will be released on Monday, alongside figures for Italy and Spain.
"The economy in the euro area is leaving the technical recession behind," analysts at Commerzbank said in a note.
Inflation has been falling recently, but the scope for price rises could increase in the future as the economy recovers, they said.
Austria will hold a bond auction on Tuesday, Portugal will follow on Wednesday, Spain and Ireland on Thursday and Italy on Friday.
Outside the eurozone, Switzerland and Denmark will hold bond auctions on Wednesday.
U.K.
The Bank of England is expected to leave its key interest rate on hold at 5.25% at a meeting announcement on Thursday, with focus on whether any more policymakers vote to cut rates and any comments that offer hints as to when rates might be cut.
At the BOE's last meeting in March, the two policymakers who had previously voted to raise rates switched to voting for no change, while one policymaker voted to cut rates.
"Overshoots for services inflation and private sector regular pay growth have extinguished any faint hopes that the Bank of England will cut interest rates in May," said Andrew Goodwin, chief U.K. economist at Oxford Economics in a note.
U.K. money markets are currently only fully pricing in a rate cut in September, with a good chance of a move in August, though analysts say a cut as early as June is possible if upcoming inflation and wages data are much weaker.
"We consider that the [Monetary Policy Committee]'s overall message will be that the economy has broadly evolved as it believed three months ago and that most on the committee will be prepared to consider easing policy before too long," said Investec economist Philip Shaw in a note.
Investec expects a rate cut in June, based on the assumption that by the time of the announcement on June 20, data for May will show inflation back at the BOE's 2.0% target and wage growth continuing their recent downward trend, Shaw said.
The U.K.'s preliminary estimate of first-quarter gross domestic product on Friday will also be a key piece of data, which are expected to show the country exited recession during the first three months of the year.
"The U.K. economy headed further away from recession in February, with output expanding by 0.1% on the month. This followed an upwardly revised 0.3% increase in January," Investec's Shaw said.
The British Retail Consortium's retail sales monitor on Tuesday* and the RICS house price balance on Thursday*, both for April, could give more clues as to how the economy has been performing at the start of the second quarter of the year.
Data for industrial production and trade are due on Friday.
The U.K. will auction the July 2053 green gilt on Wednesday.
U.K. markets are closed for a public holiday on Monday.
SWEDEN
Sweden's Riksbank announces a monetary policy decision on Wednesday, when it could begin cutting interest rates, reducing its key rate by 25 basis points to 3.75%. A delay in the rate cut until June is possible, however, due to the weak Swedish krona which could push inflation higher.
At its most recent announcement in March, when the Riksbank held rates at 4.0%, the central bank said rates could be cut in either May or June if inflation prospects remain favorable.
Recent Swedish data showed inflation falling faster than expected, while labor market data have worsened, analysts at DNB Markets said in a note.
"In our view, inflation prospects have remained favourable since March," they said.
"Domestic factors are either neutral or clearly pointing toward a policy rate cut in May, in our view."
Economists at Citi have changed their view and now expect a first rate cut in May rather than June on the basis that the economy "is clearly in need of an easier monetary stance, despite the lingering risks from a weak krona."
Bank of America economists said rate cuts are "imminent," but whether they start in May or June is a "coin toss" due to krona weakness.
NORWAY
Norwegian data on Friday are expected to show inflation slowing but staying elevated, keeping intact expectations that an interest-rate cut will be delayed until later this year.
At its meeting on May 3, Norges Bank kept its policy rate at 4.5% and said it would likely stay at this level "for some time ahead."
"Since the March Report, inflation has been slightly lower than projected. On the other hand, economic activity is slightly higher than expected, and wage growth may turn out to be slightly higher than projected. At the same time, interest rate expectations abroad have risen, and the krone is somewhat weaker than assumed," Norges Bank said.
The central bank's forecasts showed a first rate cut in the fourth quarter, but policymakers could want to push that back into 2025, Capital Economics economist Jack Allen-Reynolds said in a note.
Bank of America forecast two rate cuts in Norway, starting in September, but said risks are tilted toward just one cut, adding that weakness in the Norwegian krone "will likely skew central bank communication to the hawkish side."
AUSTRALIA
The Reserve Bank of Australia will convene a two-day policy meeting on Monday and Tuesday amid rising speculation that it will put an interest-rate increase back on the table, having shifted the policy needle closer to neutral over recent months.
Bond traders will nervously await comments by RBA Governor Michele Bullock at a press conference following the policy meeting.
Calls for a hawkish bias in the RBA's guidance follows higher-than-expected first-quarter inflation data, which is likely to force the central bank to revise up its forecasts for the consumer price index over the next two years.
Money markets have priced in some chance that the next move in interest rates will be higher, which is a big reversal from bets the RBA would cut them in the third quarter.
Analysts regard the policy meeting as a credibility test for the RBA, and stakes will be higher than in previous occasions.
CHINA
The final piece of April PMI data comes out on Monday, with a private gauge of services activity due. This comes as investors take a mixed view of the slew of PMI prints released so far, seeing signs of both recovery strength and weakness across the economy at the start of the second quarter.
Any sign of contraction in the Caixin services PMI after the gauge's 15-month run in growth territory could fan concerns about a slowdown in the sector.
"We continue to believe the postpandemic release of pent-up demand for travel and gathering has already run its course and will remain the main drag on the services PMI," Nomura research analysts said in a note.
Foreign-exchange reserves data also feature, with Barclays economists forecasting a decline in April largely due to a negative effect from a weaker yen and euro against the greenback.
(MORE TO FOLLOW) Dow Jones Newswires
05-05-24 1814ET
