Upcoming events:
- Monday: UK/US Holidays, German IFO.
- Tuesday: Australian retail sales, Canadian producer price index, US consumer confidence.
- Wednesday: Australia Monthly Consumer Price Index, Fed Beige Book.
- Thursday: Swiss GDP, Eurozone unemployment rate, US GDP2Second abbreviation
Estimate, US unemployment claims. - Friday: Tokyo CPI, Japan Retail Sales and Industrial Production, China PMIs, Switzerland Retail Sales, Switzerland Manufacturing PMI, Eurozone Rapid CPI, Canada GDP, Personal Consumption Expenditures in United State.
Tuesday
US consumer confidence is expected to decline in May to 95.9 compared to 97.0 in April. The latest report missed expectations by a large margin to reach the lowest level since July 2022. The Conference Board's chief economist stressed that “confidence fell further in April as consumers became less positive about the current situation in the labor market, and More concerned about future working conditions, job availability, and income“.
She added, “Although the general index declined in April, since mid-2022,… Optimism about the current situation continues to offset concerns about the future“.” The current status indicator will be something to keep an eye on because in general Leading indicator
Regarding the unemployment rate.
American consumer confidence
Wednesday
Australian monthly CPI is expected to be 3.4% year-on-year versus 3.5% previously.
The Reserve Bank of Australia is more focused on the quarterly CPI readings, but the monthly index is timely It can be a guide to direction, especially at turning points. Fundamental measures will be more important but this report is unlikely to change much for the central bank at the moment, although another hot report is likely to trigger a hawkish market reaction.
Australia monthly consumer price index year on year
Thursday
The unemployment rate in the euro area is expected to remain unchanged at 6.5% versus 6.5% previously. The rate has been hovering at a record low for a year, indicating a tight labor market. Moreover, the eurozone's negotiated wage growth for the first quarter of 2024 came in higher than the previous quarter, which was a setback for the ECB even though it “dismissed” it as a one-off case of delayed action to raise wages against inflation. In Germany. However, It will give them less confidence about the path of interest rate cuts beyond the one that happened in June.
Unemployment rate in the euro area
US unemployment claims remain one of the most important releases to follow each week, as they are a convenient indicator of the state of the labor market. This is because inflation rate falling to the target level set by the Federal Reserve is more likely as the labor market weakens.
However, a flexible labor market can make achieving the goal more difficult.
Initial claims continue to hover around cycle lows, while continuing claims remain steady around the 1800K level. Initial claims this week are expected to be 218K vs. 215K previously, while there is no consensus at the time of writing on continuing claims although the previous release showed an increase to 1794K vs. 1794K expected and 1786K previously.
US unemployment claims
Friday
YoY core CPI in Tokyo is expected to come in at 1.9% versus 1.6% previously. The latest report showed a significant decline in inflation across all measures although it was attributed to a one-time factor as high school tuition fees in Tokyo were effectively abolished and took effect in April. However, Inflation in Japan continues to decline This does not justify a rate hike by the Bank of Japan any time soon.
Core CPI in Tokyo year on year
China's Manufacturing PMI is expected to come in at 50.5 vs. 50.4 previously, while the Services PMI is expected at 51.5 vs. 51.2 previously. We've had some disappointing data recently with industrial production and retail sales falling short of expectations. This suggests that the economy is still struggling to recover strongly amid weak domestic demand, the continued risk of deflation, and prolonged weakness in the real estate sector. If we continue to see weakness, the People's Bank of China will likely react by easing its policy further.
China General Purchasing Managers' Index
Eurozone headline CPI on an annual basis is expected at 2.5% versus 2.4% previously, while core CPI on an annual basis is expected at 2.7% versus 2.7% previously. This report is likely to influence market expectations of the path of interest rate cuts after the June meeting. In fact, hot inflation data following strong PMIs, wage growth and labor market reports will likely lead to a hawkish repricing of interest rate expectations compared to the current 55 basis points easing seen towards the end of the year.
Core consumer price index in the euro area on an annual basis
The headline US PCE index is expected to come in at 2.6% y/y vs. 2.7% previously, while the month/month index is expected at 0.26% vs. 0.32% previously. The core personal consumption expenditures (PCE) index on an annual basis is expected to reach 2.75% versus 2.8% previously, while the monthly reading is expected to reach 0.24% versus 0.32% previously. Forecasters can reliably estimate PCE as soon as the CPI and PPI are released, so the market already knows what to expect.
This report is unlikely to change anything for the Fed The central bank remains in a “wait and see” mode until at least September. In fact, despite calls for cuts in July or November, I would say the Fed will want to deliver the first cut at a BAP meeting (unless there is a rapid deterioration in the labor market).
Core personal consumption expenditures in the United States on an annual basis