Newsquawk Week in Focus: US Inflation and Retail Sales, Chinese inflation, Trump-Xi meet
At a Glance
Lead — The desk anticipates a volatile week ahead for FX markets, driven by key inflation data releases from the US and China, as well as significant geopolitical discussions between the US and China. Per the full note source, the upcoming US CPI and retail sales figures are critical, especially following a hot March report that saw inflation rise to 3.3% Y/Y. The desk is particularly focused on how these data points will influence Fed policy amidst persistent inflationary pressures and a stable labor market.
Key Takeaways
Full Analysis
What the desk is arguing
The desk believes that the upcoming US inflation and retail sales data will play a pivotal role in shaping market expectations for the Federal Reserve's monetary policy. Per the full note source, the CPI is projected to rise by 0.6% M/M in April, while core inflation is expected to increase by 0.4% M/M. These figures will be closely scrutinized following the March CPI report, which indicated a significant uptick in consumer prices driven by energy costs.
In contrast, Chinese inflation data is expected to show easing headline figures, with CPI forecasted at around 0.8-1.0% Y/Y. This divergence in inflation trends between the US and China could lead to increased volatility in currency pairs such as USD/CNY and USD/JPY, as traders react to the implications for central bank policies.
The alternative read would be that if US inflation surprises to the upside, it could reinforce the Fed's hawkish stance, potentially leading to a stronger USD against major currencies, while a weaker than expected print could shift sentiment towards easing expectations.
Market Implications
Traders should focus on the upcoming US CPI and retail sales data, as a stronger than expected inflation print could lead to a bullish USD stance. Watch for potential resistance levels around 1.08 in USD/CNY, which may be tested depending on the inflation outcomes.
From the original
Sat: Chinese Trade Mon: Chinese Inflation (Apr), Norwegian Inflation (Apr) Tue: BoJ SOO (Apr), IEA STEO (May), EU Informal Meeting of Energy Ministers (May 12-13), Japanese Household Spending (Mar), German HICP Final (Apr), Italian Industrial Production (Mar), German ZEW (May), U
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Newsquawk Week Ahead: US NFP, ISM Services PMI, RBA, Canadian jobs and OPEC+
Lead — The desk anticipates a volatile week for FX markets, driven by key economic indicators and central bank decisions, particularly in the US and Australia. Per the full note [source], the focus will be on the US Non-Farm Payrolls (NFP) and ISM Services PMI, alongside the RBA's expected rate hike. The consensus is leaning towards a 25bps increase from the RBA, which would mark a third consecutive hike, reflecting persistent inflationary pressures. With the US jobs report due Friday, traders should brace for potential market shifts based on employment data and central bank signals.
Market outlook for the week of 11th - 15th May
Lead — The desk anticipates a cautious week ahead for FX markets, with key U.S. inflation data and central bank commentary likely to shape sentiment. Per the full note [source], the focus will be on U.S. core CPI, projected to rise to 0.3% m/m, amid concerns over rising energy and food prices due to geopolitical tensions in the Middle East. This backdrop suggests potential volatility in the USD, particularly against currencies like the AUD and GBP, as traders assess the implications for monetary policy. With the Fed Chair nomination vote also on the horizon, market dynamics could shift significantly based on the outcomes of these events.
Market outlook for the week of 25th-29th May
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