It’s gonna be another busy week in the FX market since we’ve got the BOE decision plus a handful of inflation-related data lined up.
Will the U.K. central bank follow through on rate hike expectations?
And will upcoming CPI and PPI reports suggest scope for more tightening?
Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched economic indicators on the economic calendar this week:
U.S. inflation reports
Things might start heating up for the U.S. dollar midweek, as Uncle Sam is scheduled to print the April headline and core CPI readings on May 10, 12:30 pm GMT.
After revealing a slight dip in price pressures for March, the latest batch of inflation readings might signal another pickup buoyed by energy prices.
The monthly headline reading is slated to show a 0.4% increase, up from the earlier 0.1% uptick, but this might still keep the year-over-year CPI at 5.0%. Meanwhile, the core version of the report might show a 0.3% gain, down from the previous 0.4% increase.
After that, the U.S. April PPI reports are up for release on May 11, 12:30 pm GMT. A rebound is also expected for these underlying inflation figures, as headline producer prices could recover by 0.3% month-over-month after the earlier 0.5% decline.
Still, stronger than expected figures could underscore the Fed’s relatively hawkish May statement during which Powell refrained from hinting at a tightening pause.
BOE monetary policy decision
The British pound is set to take center stage on May 11, 11:00 am GMT when the BOE announces their interest rate statement.
Policymakers are widely expected to agree on another 0.25% increase in borrowing costs, bringing their benchmark rate up from 4.25% to 4.50% in order to ward off stubborn inflationary pressures.
Recall that the latest U.K. CPI report came in much stronger than expected while other economic reports have shown some green shoots, giving the central bank room to tighten again.
Any hints that they’re planning on pausing soon, however, could mean some downside for the pound. Do keep your ears peeled for BOE head Bailey’s speech at 11:30 am GMT, too!
New Zealand inflation expectations
As for New Zealand, quarterly inflation expectations data are up for release before the end of the week on May 12, 3:00 am GMT.
It’s worth noting that expectations have dipped from 3.62% to 3.30% in the earlier quarter, keeping Kiwi traders wary about RBNZ tightening prospects.
Another increase in inflation estimates this time, however, could keep the central bank on a tightening spree, which would likely be bullish for the New Zealand dollar.
