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The Week Ahead – Private Sector PMIs and US Inflation in Focus

On the Macro

It is a quiet week ahead on the economic calendar, with stats 41 due out through the week ending May 27. In the week prior, 59 stats were in focus.

For the Dollar:

Prelim private sector PMIs for May kick things off. With markets fretting over the risk of a recession, expect the services PMI to be the key.

On Wednesday, core durable goods orders will draw interest ahead of GDP and jobless claims figures on Thursday.

At the end of the week, core PCE price index and personal spending figures will also have a material impact on the dollar and market risk sentiment.

From the Fed, the FOMC meeting minutes should provide few surprises following recent Fed Chair Powell speeches.

In the week ending May 20, 2022, the Dollar Spot Index slid by 1.35% to end the week at 103.150. In the week prior, the Index rose by 0.87% to 104.563.

For the EUR:

On Monday, Germany’s Ifo business climate index will draw interest ahead of private sector PMI numbers on Tuesday.

While the markets may forgive a weaker business climate index, weak manufacturing PMIs will test support for the EUR.

On Wednesday, the German economy will be back in focus with GDP and consumer sentiment to wrap up the week.

For the week, the EUR rallied by 1.46% to $1.0564. In the previous week, the EUR slid by 1.32% to $1.0412.

For the Pound:

It is a quiet week ahead.

Prelim private sector PMIs for May will be in focus on Tuesday. With the markets looking to second guess the Bank of England’s interest rate trajectory, expect the Services PMI to have the greater influence.

In the week, the Pound rallied by 1.78% to end the week at $1.2480. The Pound fell by 0.70% to $1.2262 in the week prior.

For the Loonie:

On Thursday, retail sales will provide the Loonie with direction.

Away from the economic calendar, crude oil prices and market risk sentiment will remain key.

In the week ending May 20, the Loonie rose by 0.69 to C$1.2840 against the greenback. The Loonie fell by 0.42% to C$1.2929 in the week prior.

From the Asia Pacific

For the Aussie Dollar:

Private new CAPEX numbers for Q1 will set the tone ahead of all-important retail sales figures on Friday.

Expect the retail sales numbers to be the key driver.

In the week, the Aussie Dollar rose by 1.44% to $0.7040.

For the Kiwi Dollar:

On Tuesday, retail sales will be in focus ahead of the RBNZ monetary policy decision on Wednesday. The markets are expecting a 50-basis point rate hike. Impressive retail sales figures could support a bigger move.

The Kiwi Dollar rallied by 1.88% to end the week at $0.6394.

For the Japanese Yen:

It’s a quiet week, with economic data limited to private sector PMIs and Tokyo inflation figures due out on Friday.

The PMIs will provide the markets with a look at how the Japanese economy is affected by the war in Ukraine and COVID-19 in China.

While inflation is key for the BoJ, May figures are unlikely to shift the Bank of Japan’s stance on interest rates. Concerns over China’s lockdown measures and the war in Ukraine remain the central bank’s main consideration near-term.

The Japanese Yen rose by 1.04% to end the week at ¥127.88 against the dollar. In the week prior, the Yen ended the week up 1.03% to ¥129.22.

Out of China

There are no material stats due out of China to provide the markets with direction.

The lack of stats will leave the markets in the hands of COVID-19 news updates and chatter from Beijing.

In the week ending May 20, the Chinese Yuan rose by 1.42% to CNY6.6930. The Yuan slid by 1.84% to CNY6.7893 in the week prior.

Geo-Politics

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