Next week’s calendar includes the FOMC minutes but it will mostly be old news given the number of Fedspeakers who have hit the wires since then. Key in next week’s data slate will likely be the price numbers, with the PCE deflator and the inflation expectations figures from the UK. The week is packed with PMIs from Germany, Europe, the UK and US, while the RBNZ Rate Decision is also in the spotlight.
Monday – 22 May 2023
PBOC Interest Rate Decision (CNY, GMT 01:15) – There is about a 50-50 risk that the PBoC will trim its 1-year medium term lending rate another 10 bps from the current 2.75% rate in a bid to revive the economy, which appears to be flagging. The rate has been unchanged since the 10 bps cut in August and is down from the 3.30% rate from late 2019. The slowing evidenced in April exports could heighten fears of a global slowdown due to central bank rate hikes and tightening in credit conditions. And that could see policymakers react preemptively.
Tuesday – 23 May 2023
Markit PMIs (EUR, GMT 07:30-08:00) – The prelim. Eurozone & Germany Services for May are expected to improve slightly with the Manufacturing sector however still in contraction, leaving the Eurozone S&P Global Composite PMI at 55.5 from 54.1.
Markit PMIs (GBP, GMT 08:30) – UK Manufacturing PMI revised higher in the final reading for March. The survey flagged that “all five of the PMI components signalled a deterioration in operating conditions”, with “output, new orders, employment and stocks of purchases” all contracting. Preliminary PMI readings for May are expected to show slight declines in both the Services and Manufacturing sectors.
Markit PMIs (USD, GMT 13:45) – May’s prelim. Services PMI in the US is expected unchanged, while Manufacturing PMI is seen at 50.0 from 50.2.
New Home Sales (USD, GMT 14:00) – New home sales are expected to fall -4.8% to a 650k pace from 683k in March, 623k in February, and 648k in January, versus a 6-year low pace of 543k in July of 2022. We expect a 655k Q2 pace for new home sales, after a 651k Q1 rate.
Retail Sales (NZD, GMT 22:45) – New Zealand Retail Sales for Q1 are expected to drop by -0.4% q/q.
Wednesday – 24 May 2023
Rate Statement & Interest Rate Decision (NZD, GMT 02:00-03:00) – The RBNZ should scale up its tightening policy for a last time with a 25 bps interest rate hike to 5.50% and then end its most aggressive tightening cycle since adopting the cash rate in 1999. The RBNZ has already raised rates by a total of 400 bps since October 2021 and at least 500 is expected, with a peak of 5.25% or higher.
Consumer Price Index and Core (GBP, GMT 06:00) – Inflation is anticipated to continue to surprise to the upside and while the latest conditional inflation forecasts suggest a drop back to below the BoE’s target, the BoE flagged upside risks and said that “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required”. UK CPI inflation for April is anticipated to rise slightly by 0.5% m/m, with headline at 8.25 y/y from 10.1%y/y.
IFO Business Climate, Assessment & Expectations (EUR, GMT 08:00) – The German IFO Business Climate is forecasted to fall to 93.4 in May down from 93.6, with Business expectations also a bit pessimistic, at 91.7 from 92.2.
FOMC Minutes (USD, GMT 18:00) – The FOMC minutes should provide guidance on the pace for further aggressive rate hikes to quell still very elevated inflation rates.
Thursday – 25 May 2023
Gross Domestic Product (USD, GMT 12:30) – A downward Q1 GDP growth revision is forecasted at 0.9% from a 1.1% pace in the advance report. We expect trimmings of -$6 bln for net exports, -$5 bln for both retail and wholesale inventories, and -$1 bln for factory inventories, but hikes of $6 bln for government purchases and $1 bln for both residential and nonresidential construction. The advance Q1 GDP data depict a quarter with a solid 3.7% consumption gain, likely fueled by a robust 12.5% Q1 clip for disposable income, alongside a hefty 4.7% pace for government purchases.
Friday – 26 May 2023
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Andria Pichidi
Market Analyst
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