Brief:
This week, the U.S. Core PCE Price Index will provide crucial macroeconomic guidance for the Federal Reserve’s long-term interest rate path.
At the same time, the Reserve Bank of New Zealand’s rate decision and Germany’s preliminary inflation figures will, from different perspectives, showcase the policy balance that non-US economies are striking between supporting growth and combating inflation.
It is worth noting that market liquidity during the New York session on Monday is expected to be significantly reduced due to a US public holiday.
Key Event to Watch:
1. U.S. Weekly Labour Market Data – Tuesday
Against a backdrop where the Federal Reserve is highly data-dependent, the balance of supply and demand in the labour market is the core variable determining the direction of wage inflation. Should employment figures demonstrate continued resilience, it would reduce the urgency for the Fed to cut rates in the near term, thereby providing support for the dollar index.
2. Reserve Bank of New Zealand Rate Decision – Wednesday
The market expects the Reserve Bank of New Zealand (RBNZ) to hold its interest rate steady. If the bank reiterates its vigilance towards upside inflation risks and maintains policy patience, it will provide relatively firm support for the New Zealand dollar. Conversely, if the statement places greater weight on downside economic risks, the Kiwi could face a degree of capital outflow pressure.
3. U.S. April Core PCE Price Index (YoY) – Thursday
As the Federal Reserve’s most favoured inflation metric, the Core PCE Price Index will directly test the sticky characteristics exhibited by recent inflation data. Should the year-on-year growth of Core PCE meet or even exceed market expectations, it would completely dash any hopes of the Fed initiating an easing cycle in the near future, and US Treasuries could face a further sell-off.
4. German May CPI Flash Estimate (MoM) – Friday
Germany’s preliminary inflation figure is a key leading indicator for assessing European Central Bank policy. If the data shows that the disinflationary process has stalled, particularly with stubborn characteristics in core areas like services, it will increase the ECB’s hesitation regarding easing decisions and could provide temporary support for the euro.
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