The Week Ahead: US CPI Report, Retail Sales, and Fed Chair Powell in the Spotlight

The US Dollar

On Monday (May 13), US consumer inflation expectation numbers warrant investor attention. Upward trends in inflation expectations could influence the Fed rate path.

However, producer and consumer inflation numbers will have more impact on investor sentiment toward the Fed rate path. The numbers are out on Tuesday (May 14) and Wednesday (May 15). Hotter-than-expected numbers could fuel investor bets on Fed rate hike.

Retail sales figures on Wednesday also warrant consideration. Upward trends in consumer spending would fuel demand-driven inflation and pressure the Fed into a more hawkish Fed rate path.

Jobless claims figures will draw investor interest on Thursday (May 16). Another spike in jobless claims could temper investor fears of a more hawkish Fed interest rate trajectory.

With inflation, retail sales, and the US labor market in focus, investors should monitor FOMC member chatter. Views on inflation and monetary policy could move the dial.

Fed Chair Powell is on the calendar to speak on Tuesday (May 14). FOMC members Loretta Mester (Mon/Thurs), Philip Jefferson (Mon), Lisa Cook (Tues), Neel Kashkari (Wed), Michelle Bowman (Wed), Michael Barr (Thurs), Patrick Harker (Thurs), Raphael Bostic (Thurs), and Christopher Waller (Fri) will also deliver speeches.

The EUR

German inflation and economic sentiment figures will impact buyer demand for the EUR/USD on Tuesday. Downward revisions to preliminary inflation numbers could support ECB interest rate cuts beyond June. Moreover, upward trends in the ZEW Economic Sentiment Index would align with expectations of an improving macroeconomic environment.

On Wednesday, finalized inflation numbers for France and second estimate GDP figures for the Eurozone also need consideration. The stats may influence investor bets on post-June ECB rate cuts.

On Friday, finalized inflation figures for the Eurozone will attract investor attention. Revisions to the preliminary numbers could affect the 2024 ECB interest rate trajectory.

Investors should also track ECB commentary. ECB Executive Board members Piero Cipollone (Mon), Claudia Buch (Mon), Luis de Guindos (Tues/Fri), and Isabel Schnabel (Wed) are on the calendar to speak. Views on inflation and the economy may influence the ECB interest rate path.

The Pound

The UK Labor Market Overview Report will influence buyer appetite for the Pound. Weaker-than-expected wage growth numbers and a higher unemployment rate may fuel expectations of a June BoE rate cut.

After the BoE monetary policy decision (May 9), investors should consider BoE commentary. BoE Chief Economist Huw Pill (Tues) and Monetary Policy Committee Members Megan Greene (Thurs) and Catherine Mann (Fri) are on the calendar to speak. Reactions to the labor market data and views on the timeline for a BoE rate cut would move the dial.

The Loonie

Housing sector data will influence buyer appetite for the Loonie on Monday, Wednesday, and Friday. A deteriorating housing market could impact consumer and spending, leading to a softer inflation environment.

Other stats include wholesale sales and foreign securities purchases. However, the numbers will unlikely influence the Bank of Canada rate path.

The Australian Dollar

On Monday, Australian business confidence numbers for April will put the Aussie dollar in focus. Upward trends in business confidence may signal an improving macroeconomic environment and support job creation and wage growth.

However, labor market data will impact the Aussie dollar more on Wednesday and Thursday. Hotter-than-expected wage growth numbers would raise investor bets on a RBA rate hike. Labor market data for April will also influence sentiment toward the RBA rate path.

In the RBA press conference, RBA Governor Michele Bullock played down talk about an interest rate hike. Wage growth trends could change the narrative.

The Kiwi Dollar

On Monday, inflation expectation numbers will put the investor focus on the NZD/USD and the RBNZ. Hotter-than-expected inflation expectation numbers could influence the RBNZ rate path.

Electronic card retail sales figures for April will warrant investor attention on Tuesday. A pickup in consumer spending would fuel demand-driven inflation.

On Friday, producer prices also need consideration.

The Japanese Yen

Producer prices from Japan will put the RBA and the Japanese Yen under the spotlight on Tuesday. The Bank of Japan needs a pickup in demand-driven inflation to begin discussions about rate hikes. Upward trends in producer prices would signal an improving demand environment.

GDP numbers for Q1 2024 will be in focus on Thursday. A contraction may leave the BoJ in a holding pattern vis-à-vis monetary policy.

Furthermore, investors should monitor Bank of Japan comments about interest rates and Japanese government intervention threats.

Out of China

On Friday, industrial production, retail sales, unemployment, and fixed asset investment numbers from China will warrant investor attention. A continued improvement in the demand environment would likely spur buyer demand for riskier assets. Nevertheless, upbeat stats could reduce the chances of a fiscal stimulus package.