On Monday, Canada has a bank holiday for Victoria Day, and in the U.S., several FOMC members are expected to deliver remarks.
On Tuesday, the focus will be on the RBA monetary policy announcement, followed later in the day by Canadian inflation data.
On Wednesday, the U.K. will release its inflation data and on Thursday, flash manufacturing and services PMIs will be released for the eurozone, the U.K., and the U.S.
Finally, on Friday, Japan will publish its national core CPI y/y, while the U.K. and Canada will release their retail sales data.
At this week's meeting, the RBA is widely expected to deliver a 25 bps rate cut, lowering the cash rate from 4.10% to 3.85%.
Recently, inflation data in Australia has softened, with the trimmed mean CPI dipping to 2.9%, now within the RBA's target range. Headline inflation held steady at 2.4%.
Wages rose 3.4% y/y, driven by public sector agreements, while private sector wage growth remained stable. April’s jobs report surprised to the upside, adding 89,000 positions, and the unemployment rate held at 4.1%.
The RBA is expected to continue cutting rates through the end of the year. However, Wells Fargo analysts argue that solid domestic data and easing China-U.S. trade tensions reduce the likelihood of further policy easing.
The consensus for the CPI m/m is 0.5%, up from the prior 0.3%. The median CPI y/y is expected to remain unchanged at 2.9%, while the trimmed CPI y/y is projected to rise from 2.8% to 2.9%, and the common CPI y/y is likely to increase from 2.3% to 2.4%.
Analysts from RBC argue that Canada’s April CPI is likely to reflect a drop in headline inflation, primarily due to the removal of the consumer carbon tax on energy products at the beginning of the month. They emphasize that the distortion stems from a temporary federal tax relief measure, which included the GST rebate and ended in February. As a result, annual inflation is forecast to fall sharply from 2.3% in March to 1.6%.
Analysts do not expect the effects of tariffs to be reflected in this month’s data just yet. Retaliatory tariffs are anticipated to have a limited impact on consumer prices, as businesses pivot to alternative import sources and consumers shift toward non-tariffed goods.
Canadian food price growth is expected to remain elevated at 3.2% y/y in April, with core inflation rising to 2.6%. March retail sales, due this week, are expected to have rebounded to 0.7% from a February decline, driven by pre-tariff auto purchases. While auto sales likely dipped in April, broader consumer spending appears resilient despite weaker sentiment.
In the U.K., the consensus for CPI y/y is 3.3%, up from the prior 2.6%. Core CPI y/y is likely to rise from 3.4% to 3.6%, while services inflation is expected to come in below the BoE’s forecast of 5%.
Analysts at ING emphasized that April’s inflation data carries extra weight, as it is typically the month when a wide range of services prices are reset for the year. Both April 2023 and 2024 delivered surprises that jolted markets, often with stronger-than-expected prints.
In terms of monetary policy, the BoE is not finished with rate cuts just yet, with another reduction expected at either the June or August meeting.
This week's PMI data for the eurozone will offer a clearer picture of how the economy is holding up. Last month, the services sector declined to 50.1, while manufacturing remained in contractionary territory at 49, and the composite PMI slipped from 50.9 to 50.4.
Recently, conditions in the euro area appear to have stabilized, supported by easing E.U.–U.S. trade tensions, political stability in Germany, and softening inflation data, all of which point to a modest pickup in activity.
In Japan, the consensus for the national core CPI y/y is for an increase from 3.2% to 3.5%. This rise is largely attributed to the effects of reduced energy subsidies and new price hikes in sectors such as food and education. Tokyo CPI, often viewed as a bellwether, surprised to the upside earlier this month, climbing to 3.4% y/y, while the core print excluding fresh food and energy surged to 3.1%, its highest level in over a year.
As a reminder, the BoJ left rates unchanged at its May meeting but signaled openness to further hikes if inflation remains persistent. Uncertainty surrounding U.S. tariffs and signs of weakening global demand complicate the outlook.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
Finally We wish PressBee provided you with enough information of ( Market Outlook for the week of 19th - 23rd May )
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