FX Week Ahead Overview:
- There are several ‘high’ rated US economic data releases in the coming days, but none are more important than the April US retail sales report and a speech by Fed Chair Jerome Powell.
- Incoming inflation data from the Eurozone and the UK will likely draw a further juxtaposition between the near-term policy paths for the Bank of England and European Central Bank.
- Despite weakness onset by its largest trading partner, the Australian Dollar may find some reprieve around the upcoming April Australian jobs report.
For the full week ahead, please visit the DailyFX Economic Calendar.
05/17 TUESDAY | 12:30 GMT | USD Retail Sales (APR)
US consumer confidence continues to plummet as US inflation rates remain stubbornly high, a bad mix for consumption trends. But US consumers seem to be weathering the storm in the short-term, racking up debt quickly in order to sustain their spending habits (consumption was one of the only components of the 1Q’22 US GDP report in positive territory). According to a Bloomberg News survey, US retail sales grew by +0.9% m/m in April, an acceleration from the +0.5% m/m rate seen in March. The Atlanta Fed GDPNow growth tracker for 2Q’22 currently sits at +1.8% annualized. In totality, the data should remain supportive of the US Dollar.
05/18 WEDNESDAY | 06:00 GMT | GBP Inflation Rate (CPI) (APR)
UK inflation rates are expected to carve out a new 40-year high when the April UK inflation rate report (CPI) is released this Wednesday. The headline reading is due in at +9.1% y/y from +7% y/y, while the core reading is due in at +6.2% y/y from +5.7% y/y. But will these data change the Bank of England’s calculus? Perhaps not; less than two weeks ago, BOE policymakers suggested that growth is just as much as a concern as inflation, meaning that further aggressive rate hikes may not transpire. Barring a significant repricing of BOE rate hike odds, the British Pound remains vulnerable to more downside.
05/18 WEDNESDAY | 09:00 GMT | EUR Inflation Rate (HICP) (APR)
The final April Eurozone inflation rate report (HICP) is expected to show another increase in price pressures. A Bloomberg News forecast shows headlines price pressures up by +0.6% m/m and +7.5% y/y, and the core reading up to +3.5% y/y from +2.9% y/y. Will these data inspire the European Central Bank to finally withdraw stimulus and raise interest rates? Perhaps; there has been increasing chatter among ECB policymakers that a July rate hike is possible, which would necessitate a winddown of asset purchases at the June ECB meeting. If more of those comments emerge after the Wednesday’s inflation data, then the Euro may finally find some respite.
05/18 WEDNESDAY | 12:30 GMT | CAD Inflation Rate (CPI) (APR)
It’s still early, but the April Canada inflation rate report (CPI) may finally offer some signs of easing price pressures. According to a Bloomberg News survey, headline inflation is due in at +0.5% m/m from +1.4% m/m and unchanged at +6.7% y/y, while core inflation is expected at +0.4% m/m from +1% m/m and +5.4% y/y from +5.5% y/y. However, given how far price pressures continue to run above the Bank of Canada’s medium-term target of +2%, it stands to reason that the data won’t disincentivize another rate hike when the BOC meets next on June 1.
05/19 THURSDAY | 01:30 GMT | AUD Employment Change & Unemployment Rate (APR)
Despite a spat of weakness recently catalyzed by China’s lockdowns, the Australian Dollar may benefit from upcoming jobs data that is expected to underscore the resiliency and strength of the domestic Australian economy. Surveys suggest that the Australian unemployment rate will fall to 3.9% from 4%, its lowest level in nearly half a century, on the back of a gain of +30K jobs in April. The data should pave the path for another rate hike by the Reserve Bank of Australia in June, which may help alleviate some of the Aussie’s recent struggles.
— Written by Christopher Vecchio, CFA, Senior Strategist