Eyes on ECB
It will be a busy week with central banks' monetary policy meetings in Australia and Europe, inflation and trade balance of China and the US, and Japanese and European GDP. The importance of this week and banks' decisions are that first; the data are more updated with the war and inflation effects. Second, the central bank's reaction with the level of tightening policies will be more specific. Let's review the most critical data and events of the week together.
1- Australian Central Bank - Tuesday
While the labor market is growing well enough to ensure businesses and employees about the stable growth in this area, inflation is still improving. The latest published data also show that GDP in the first quarter increased by 0.8%, much more than the 0.5% estimated. More reasons for additional tightening policies from the RBA, which seems on course to hike rates again in June. The meeting announcement must be positive for the Australian Dollar.
2- US Trade Balance - Tuesday
Under pressure income and increasing inflation in the last months decreased the demand, resulting in lower imports. Also, the newest quarantine and restrictions in Shanghai, the most prominent Chinese port, can be another reason to have fewer imports in the US compared with other periods. That could be the first narrowing in the trade balance since October 2021. Expected data must be positive for the US stock markets.
3- Chinese Trade Balance - Thursday
Since most of May, Shanghai, and some other areas were in lockdowns, it is likely to see that export to fall sharply. However, since the reason was temporary, the reverse is expected to compensate for this slowness in the following months quickly. As a result, the trade surplus for China is likely to lower in May to 50.65 bln from 51.12 bln in April, which is negative for Chinese Yuan.
4- European Central Bank - Thursday
For this meeting, we expect the ECB to announce an end to its bond purchasing program, and that net asset purchases will be completed by the end of the month. However, it is avarice to expect the conservative ECB to start raising the rates in this meeting. Still, thy will probably signal that a rate hike is imminent, as inflation is above 8%, and it will become an essential European concern. As a result, Euro must be stronger against its crosses.
5- US Inflation - Friday
After 8.3% in April, now target moves a bit higher at 8.4% in May, as driving factors are still hot. Gas prices are increasing sharply in line with Oil, while high electricity and food prices also make inflationary struggles inevitable for most consumers. However, since the most inflation drivers are energy and food prices, Core CPI is expected to fall to 5.9%. Suppose actual numbers are the same as anticipated numbers, in that case, talks about pausing interest rate hikes in September will become washy, which is negative for the stock markets and positive for the US dollar.
6- Canadian labor market - Friday
The week will conclude with Canadian labor market data. It is estimated to see the unemployment rate is unchanged at 5.2%, with 55,000 newly created jobs. Overall data must confirm the economic progress in Canada and support the Canadian Dollar against its crosses.
