Currency

The Week Ahead – Central Banks Back in Focus Amidst Recession Fears

On the Macro

It is a busy week ahead on the economic calendar, with stats 59 due out through the week ending May 20. In the week prior, 45 stats were in focus.

For the Dollar:

It is a relatively busy week ahead.

On Tuesday, retail sales will be the area of focus ahead of jobless claims and Philly Fed manufacturing numbers on Thursday.

While the numbers will influence, Fed Chair Powell and FOMC member chatter will be the key in the week. The markets will be looking for Fed Chair Powell to back up comments from Friday and for members to align with his assurances.

On Friday, the Fed Chair assured the markets that larger rate hikes were off the table.

In the week ending May 13, 2022, the Dollar Spot Index rose by 0.87% to end the week at 104.563. In the week prior, the Index rose by 0.68% to 103.660.

For the EUR:

It is a quiet week ahead.

Eurozone trade and GDP numbers are due out ahead of finalized inflation figures on Wednesday.

Expect any revisions from the first estimate GDP and any upward revisions to prelim inflation figures to draw interest.

On Friday, flash consumer confidence figures for the Eurozone will wrap things up.

From the EU, the Economic Forecasts are due out on Monday and will likely have a greater impact than the numbers, however.

On the monetary policy front, ECB President Lagarde is due to speak on Tuesday, with the policy meeting minutes due out on Thursday.

For the week, the EUR slid by 1.32% to $1.0412. In the previous week, the EUR rose by 0.06% to $1.0551.

For the Pound:

It is a busy week ahead.

On Tuesday, claimant counts and the UK unemployment rate will draw interest ahead of inflation figures on Wednesday.

On Friday, retail sales numbers wrap things up. The stats will give the markets an idea of the impact of inflation on spending and whether the Bank of England needs to take a more hawkish stance to curb inflation.

From the BoE, the monetary policy report hearings will influence on Monday.

In the week, the Pound fell by 0.70% to end the week at $1.2262. The Pound tumbled by 1.79% to $1.2348 in the week prior.

For the Loonie:

Inflation will be the area of focus. On Wednesday, April’s figures are due out and will provide the Loonie with direction.

Other stats in the week include wholesale sales and RMPI numbers that will have less impact.

From the Asia Pacific

For the Aussie Dollar:

Wage growth will be in the spotlight on Wednesday ahead of employment numbers on Thursday.

While wage growth is an RBA consideration, employment figures will need to be positive to support a more hawkish RBA.

From the RBA, the meeting minutes are due out on Tuesday and will provide direction.

In the week, the Aussie Dollar slid by 1.92% to $0.6940.

For the Kiwi Dollar:

Wholesale inflation figures for the first quarter are out ahead of trade data on Friday.

With little else to consider, both sets of numbers will influence. However, China and sentiment towards the global economic outlook will remain the key drivers.

The Kiwi Dollar tumbled by 2.09% to end the week at $0.6276.

For the Japanese Yen:

First quarter GDP numbers will draw plenty of interest on Wednesday ahead of trade data on Thursday.

The Bank of Japan painted a grim picture at the last policy meeting, highlighting downside risks stemming from China and the war in Ukraine.

This week’s stats will give a sense of how bad it could be.

At the end of the week, April inflation figures are also due out. Barring a spike, however, we don’t expect too much influence on the Yen.

The Japanese Yen rose by 1.03% to end the week at ¥129.22 against the dollar. In the week prior, the Yen ended the week down by 0.66% to ¥130.56.

Out of China

Fixed asset investments, industrial production, and retail sales figures are out on Monday.

Expect plenty of interest in the numbers as the markets look to assess the impact of lockdown measures on economic activity.

While the government has promised support, we can expect market sensitivity to the numbers.

On the policy front, the PBoC will set loan prime rates on Friday, with any cuts to support riskier assets. Forecasts are for the PBoC to leave the LPRs unchanged.

Away from the economic calendar, COVID-19 news updates and chatter from Beijing will also influence.

In the week ending May 13, the Chinese Yuan slid by 1.84% to CNY6.7893. The Yuan declined by 0.88% to CNY6.6667 in the week prior.

Geo-Politics

Russia and Ukraine will remain the area of focus in the week ahead.