Market Outlook for the Week of 15 – 19 May


The upcoming week is expected
to be quite eventful and filled with data releases in all markets. The most
important events will be:

On Monday, the U.S. will release the Empire State Manufacturing Index,
providing insights into the manufacturing sector’s performance.

Tuesday will see several key
releases. In Australia, the Westpac consumer sentiment data and the Monetary
Policy Meeting Minutes will be important to watch. Meanwhile, the U.K. will
report the claimant count change, average earnings index 3m/y, and the
unemployment rate. Additionally, the eurozone will share the German ZEW
economic sentiment report. In Canada, important data such as the CPI m/m,
manufacturing sales m/m, core retail sales m/m, and retail sales m/m will be
published. In the U.S., we’ll get the industrial production data.

Moving on to Wednesday,
Australia will report the Wage Price Index q/q, offering insights into wage
growth. In the U.S., attention will be on the release of building permits and
housing starts, providing indicators for the housing market’s performance.

Thursday will bring
significant updates. Australia will share the employment change and
unemployment rate figures, shedding light on the labour market. In Europe, it
will be a bank holiday in observance of Ascension Day. In the U.S., the focus
will be on the unemployment claims, Philly Fed manufacturing index, existing
home sales, and the CB leading index. Moreover, the Bank of Canada (BoC)
Governor Macklem is expected to hold a press conference in Ottawa, discussing
the Financial System Review.

Lastly, on Friday, Japan will
release the National Core CPI y/y, providing insights into inflation trends.
The G7 Meetings will take place, with discussions revolving around global
economic and geopolitical issues. In the U.S., Fed Chair Powell will
participate in a panel discussion titled „Perspectives on Monetary
Policy“ at the Thomas Laubach Research Conference in Washington DC.
Furthermore, some Fed members are expected to deliver remarks throughout the
Tuesday’s release of the RBA minutes will provide valuable insights into the
surprising 25bps rate hike delivered by the Bank at its previous meeting,
catching many off guard as they anticipated a pause. During the meeting, the
RBA maintained a hawkish stance, indicating the need for further tightening
measures to combat the persistently high inflation levels. The Bank emphasized
its commitment to taking the necessary actions to address the issue. In
Australia, although inflation may have reached its peak — currently standing
at 7% — it remains significantly elevated compared to the Bank’s target and
the current forecast is that it will take a couple of years to return to
The upcoming labour market data for the U.K. could show some improvement,
particularly in terms of participation, employment and wage growth. The
consensus among analysts is for the unemployment rate to remain unchanged at
3.8%, but Citi forecasts a positive 3-month employment change to 190K from the
previous 169K. Should the labour market data continue to exhibit strength,
there is a possibility that the Bank of England will hike the rate by another
25bps at its next meeting in June. However, the decision will also take into
account other factors, such as the forthcoming CPI data scheduled for release
on May 24th, which will contribute to shaping the BoE’s stance.
In the U.S., headline retail sales are projected to rise by 0.7% for the
month-over-month data, while core retail sales are expected to show a modest
uptick of 0.5% m/m. However, Bank of America’s „Consumer Checkpoint“
data suggests a softening in consumer spending, with total card spending per
household declining to -1.2% year-over-year (Y/Y).

The upcoming CPI data for Canada will be closely monitored this week, as its
results carry significant weight. The consensus forecasts a 0.5% increase for
the month-over-month figures, while the year-over-year CPI is expected to drop
slightly from 4.3% to 4.2%. Citi analysts anticipate continued easing in the
y/y figures towards 3% in the coming months, largely driven by substantial base
effects from lower energy prices. Additionally, the Bank of Canada has
emphasized that if inflation persists above target, further tightening is

The labour market in Australia
remains tight. This week’s data is expected to show wage growth acceleration
primarily driven by the private sector. The unemployment rate is at the
historical 50-year low level of 3.5% under NAIRU forecasts of 4%-4.5%.

In the U.S. housing starts are
expected to see some further decreases, with a consensus of -1.4% m/m to 1.4M
from 1.42M. The consensus for building permits in April is 1.44M, a slight
growth from the previous 1.43M, but analysts from Citi anticipate a much higher
rise to 1.51M (6.2% m/m).

On Thursday, Australia will release labour market data, including the
employment change figures and the unemployment rate. The consensus suggests
that the unemployment rate will decline from 3.5% to 3.4%, while the
participation rate is expected to remain unchanged. Although the current labour
market data appears robust, there are indications from the business sector of a
slight easing in labour demand. Thursday is a bank holiday in most of Europe in
observance of Ascension Day.

For the U.S. – unemployment
claims; Philly Fed manufacturing index; existing home sales and the CB leading

In the U.S. all eyes will be
on the unemployment claims data as it can give us some clues about the labour
market. The consensus is for a drop from 264K to 251K, suggesting the labour
market remains tight for now. Some softness is likely for existing home sales
with a drop to 4.30M from 4.44M being expected. Mortgage application data will
be an important factor for existing home sales, which might stall because
homeowners are reluctant to sell and give up their existing mortgage rates that
are much lower than current ones.

On Friday, Bank of Canada
Governor Macklem is scheduled to hold a press conference in Ottawa, focusing on
the Financial System Review. While these events usually do not yield
significant announcements, it is worth paying attention as there is a
possibility that he may provide new insights on inflation.

In Japan, the National Core
CPI year-on-year data will be released. Over the past few months, Japan has
experienced moderate economic growth, and this trend is expected to continue in
the near future. Although inflation in Japan remains elevated, consumer prices
are considerably lower compared to other developed countries. There are
indications that inflation in Japan may have already peaked, and with the
implementation of government subsidies and the modest economic growth, it is
possible that inflation will gradually return to the Bank’s target.

On Friday, Federal Reserve
Chair Powell is scheduled to speak at the Thomas Laubach Research Conference in
Washington DC, where he will participate in a panel discussion focused on
„Perspectives on Monetary Policy.“ While this event is not anticipated
to yield any significant developments, there is a possibility that Chair Powell
may address topics such as inflation and future rate hikes in his remarks.

This article was written
by Gina Constantin.

This article was written by ForexLive at

Go to Forexlive

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