What intrigued me most about last week’s Bank of England’s “unchanged” interest rate decision was the press conference hosted by Governor Bailey shortly afterwards. The Bank’s committee shifted from a 9-0 unanimous “hold” stance to a 7-2 majority as two doves cooed for a cut.
Governor Bailey said a few things of note; the one that stood out for me was that the Bank’s decisions are not hinged on the those of the Fed. He re-iterated that the Bank analyses the data and as an independent body is apolitical. Lastly, and I think clearly, the committee’s decisions will depend on inflation and from that I inferred confidence that the trajectory of inflation is nearing the Bank’s 2% objective. I will be taking a keen interest in UK CPI numbers, the next of which are out on 22nd May. My feeling is that the Bank of England will probably cut interest rates in June!
To this week, and from a data standpoint the outstanding release is Wednesday’s US inflation figures. Consensus estimates are for headline inflation to drop to 3.4% and core to drop to 3.6% y.o.y for April. Simultaneously, US Retail sales numbers will be released and expectations are for a drop to 0.4% for April.
The main European releases come out on Tuesday, Wednesday and Friday. First up on Tuesday is German inflation expected at 2.2% y.o.y for April. UK employment numbers are out as well at 7am and a well telegraphed rise in the unemployment rate is expected at 4.3% or higher for March. German and European ZEW economic sentiment figures to be released later in the morning are likely to show renewed confidence. Tuesday is also a day where US producer prices for April will be released with the month-on-month increase expected at 0.2%. Fed Chair Powell will speak in the afternoon.
Wednesday’s main European data is Euro Area GDP, with estimates of year-on-year growth of 0.4% for the first quarter. Japanese Q1 GDP on the other hand (out Thursday morning) is likely to be a shocker with forecasts of -1.5% for the quarter! Australian unemployment is expected to nudge higher to 3.9% for April despite new additions to the payroll.
Friday’s main event is Euro Area inflation and forecasts are for this to continue its gradual decline and a print of 2.7% y.o.y for April.
Good Luck and Good trading!
Ben Robson is Head of Institutional E-FX at Swiss Finance Corporation. He is also the Amazon Best Selling Author of Currency Kings – How Billion traders Made their Fortune Trading Forex. McGraw Hill 2017
