UPCOMING EVENTS:

  • Monday: China Caixin Services PMI, Eurozone PPI, Fed SLOOS.
  • Tuesday: RBA Policy Decision, Switzerland Unemployment Rate, Eurozone Retail Sales.
  • Thursday: Japan Average Cash Earnings, BoJ Summary of Opinions, BoE Policy Decision, US Jobless Claims.
  • Friday: New Zealand Manufacturing PMI, UK GDP, Canada Jobs report, US University of Michigan Consumer Sentiment survey,

Tuesday

The RBA is expected to keep the Cash Rate unchanged at 4.35%, although the risk of a shock rate hike cannot be dismissed. The last inflation report was a cold shower for rate cuts expectations in 2024 as the Q1 CPI figures beat forecasts across the board by a big margin. The market pushed back the expectations for the first rate cut further away with the first move now seen sometime in Q2 2025. The central bank stated several times that the best contribution that monetary policy can make to the wellbeing of the Australian people is to ensure that inflation returns to target in a reasonable timeframe.

RBA
RBA

Thursday

The Japanese Average Cash Earnings Y/Y is expected at 1.5% vs. 1.8% prior. The BoJ continues to see the achievement of their inflation target and stating that another rate hike remains dependent on the data. The timing for such a move remains uncertain though with July and October being on the table, although the latter is the most probable one. Governor Ueda has also mentioned that irrespective of what the data would say in the near future, they would like to find a way and timing to reduce the amount of JGB purchases.

Japan Average Cash Earnings YoY
Japan Average Cash Earnings YoY

The BoE is expected to keep interest rates unchanged at 5.25%. The latest inflation report showed the headline and core figures moderating further but the services inflation measure, which is what the central bank is more concerned about, remaining sticky at 6%. On the labour market side, the last data showed an increase in the unemployment rate and job losses with high wage growth figures. At the last meeting, the vote split changed with the most hawkish members joining the hold camp and Dhingra remaining the usual dissenter voting for a cut. The market expects the first rate cut in September and it’s unlikely that we will see the BoE making major changes at the upcoming decision.

BoE
BoE

The US Jobless Claims continue to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market. This is because disinflation to the Fed's target is more likely with a weakening labour market. A resilient labour market though could make the achievement of the target more difficult. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around the 1800K level. This week Initial Claims are expected at 210K vs. 208K prior, while there is no consensus at the time of writing for Continuing Claims although the prior release showed a decrease to 1774K vs. 1797K expected and 1781K prior.

US Jobless Claims
US Jobless Claims

Friday

The Canadian labour market report is expected to show 17.5K jobs added in April vs. -2.2K in March with the unemployment rate ticking higher to 6.2% vs. 6.1% prior. The last report missed expectations across the board with job losses and a big jump in the unemployment rate. There was also an increase in wage growth, which is what the BoC is more concerned about, although a looser labour market should depress wage gains going forward. The market expects the central bank to deliver the first rate cut in June, although the probability for a July move is higher.

Canada Unemployment Rate
Canada Unemployment Rate