The focus remains on inflation and the much anticipated response from the FOMC, RBA and BOE next week, while the markets price in action from the ECB down the road. The advent of month-end, a holiday in Japan on Friday, and the UK also shut on Monday accelerated some profit taking on Wall Street after the early rally. It looks as though many are sidelined into the weekend and ahead of the FOMC where there is a lot of uncertainty over the aggressiveness of the Fed’s normalization path, and the BOE’s ambiguity. Hiking rates too much too quickly would only increase the risk of a stagflation scenario and the BOE’s current policy is already much closer to neutral than the ECB’s. The week also sees NFP, and employment data from Canada, Europe and New Zealand.
Monday – 02 May 2022
Retail Sales (EUR, GMT 06:00) – German Retail Sales for March are expected to steady at 0.3% m/m.
Manufacturing PMI (EUR, GMT 07:55–08:00) – The German & Eurozone Manufacturing PMI for April are seen unchanged at 54.1 and 55.3 respectively.
ISM Manufacturing PMI (USD, GMT 14:00) –The ISM index is expected to rise to 57.5 from 57.1 in March, versus an 18-year high of 63.7 in March ’21, an 11-year low of 41.6 in April ’20, and an all-time low of 30.3 in June 1980.
Tuesday – 03 May 2022
Interest Rate Decision & Statement (AUD, GMT 04:30) – This week, Australia’s inflation surge put pressure on the RBA. Australia CPI lifted 2.1% q/q in the first quarter of the year, while the annual rate jumped to 5.1% y/y – the highest level since the introduction of the Goods and Services Tax in the early 2000s. As elsewhere the surge owes much to sharply higher fuel prices, which were up 11% versus the last quarter of 2021. Still, the higher than expected numbers will put pressure on the RBA to step in and hike rates, with the chances of a move in May rising. The numbers reflect to a large extent temporary factors and supply chain disruptions, but with labour markets tightening and the risk of second round effects mounting, the RBA might decide to step in before wage growth starts to get out of control, especially as underlying inflation was also substantially stronger than expected.
Employment Change (EUR, GMT 07:55) – The German employment change is expected to show a contraction to -15K for April.
Employment Rate (NZD, GMT 22:45) – The New Zealand employment change is expected to show a slowdown in Q1 with unemployment at 3.2%, while the participation rate and labour cost index remain unchanged at 71.1% and 0.7% in Q1.
Wednesday – 04 May 2022
Retail Sales (AUD, GMT 01:30) – Australian Retail Sales s.a. for March are expected to decline to 0.5% from 1.8% m/m.
Retail Sales (EUR, GMT 09:00) – Eurozone Retail Sales for March are expected to decline to 0.2% from 0.3% m/m and headline to dip to 1% from 5% y/y.
ADP Employment Change (USD, GMT 12:15) –The key private payrolls number is expected to climb to 370K (a 85k decline on last month’s reading).
Interest Rate Decision & Statement & Conference (USD, GMT 18:00) – The acceleration in price pressures alongside a strong labor market have significantly increased the risk of even more aggressive action by the FOMC than previously projected, with the markets now pricing in four consecutive 50 bp hikes beginning in May, with some chance for a 75 bp boost down the road.
Thursday – 05 May 2022
Trade Balance (AUD, GMT 01:30) – The trade surplus for Australia is expected to lower in March to 8.5 bln from 7.45 bln in February.
Interest Rate Decision & Statement & Conference (GBP, GMT 11:00) – BOE head Bailey already flagged at the last meeting that there is a real risk that the jump in living expenses will hit demand. He followed up last week by stressing that the bank is walking a very tight line between escalating price pressure and the output effects of the real income shock, with the risk that this could create a recession. Bailey flagged concern over what is happening in food prices and said the inflation target is facing the most severe test since the independence of the bank in 1997. The comments highlight that the outcome of the May meeting is not cast in stone yet and that even after the last statement flagged the likely need for additional rate hikes, the central bank could still have a change of heart. Indeed, much of the jump in prices is out of the control of the central bank, as energy price inflation is driven by global pressures and the fallout from the Ukraine war and sanctions on Russia. Hiking rates too much too quickly would only increase the risk of a stagflation scenario and the BOE’s current policy is already much closer to neutral than the ECB’s.
Friday – 06 May 2022
Event of the Week – Non-Farm Payrolls (USD, GMT 12:30) – An 380k April nonfarm payroll increase is anticipated, after gains of 431k in March, 750k in February, and 504k in January. Payroll growth should slow gradually through 2022 with reduced growth in the economy. Average hourly earnings are assumed to rise 0.4%, the same as in March, while the y/y wage gain should dip to 5.5% from 5.6%. In the last expansion, we saw a 3.5% peak for y/y wage gains, in both February and July of 2019, before the pandemic-boost to an 8.0% peak in April of 2020, and the ensuing strength in wage gains that has allowed continued robust y/y increases into 2022.
Labour Market Data (CAD, GMT 12:30) – Canada’s unemployment is anticipated higher in April to 5.4% from 5.3%, with participation rate unchanged at 65.4%.
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