A big week for the UK this week with the release of CPI data and a number of underlying inflation indicators. The quandary the UK government and Bank of England finds itself in at the moment is increasing inflation which appears not to be driven significantly by consumer demand but by currency fluctuations. If inflation continues to rise and wages do not rise alongside we start to see reduced consumer demand, if the Bank of England increases interest rates to control inflation we see even further reductions in consumer demand, this cycle is known as stagflation. Limited economic growth with increasing inflation is not a good place to be. So the releases this week will be very important to watch.
Alongside this we could see some volatility generally in both the UK and the US. The UK political party manifestoes are due to be released this week, and inevitably the markets will be watching and have their own reactions to the proposals. In addition pressure is mounting on Donald Trump after his recent Nixon-esque firing of the director of the FBI. While lots of people are likening this to the Watergate scandal it is not quite as significant but opponents to the Trump administration will continue to draw parallels to weaken the president. The one thing we know about Trump is that he doesn’t like being backed into a corner and therefore anything could happen, watch out North Korea!
Andi Thornton: TradingHUB Chief Analyst.
Sunday 14th May
1145 p.m. | NZD | Retail Sales – Prior 0.8% | Expected 1.1%
Despite the RBNZ remaining accommodative last week there have been improvements in New Zealand’s economy, most notably inflation. Consumer spending is the biggest driver of inflation within the economy and we have a positive forecast of 1.1% which will further strengthen the New Zealand position.
Tuesday 16th May
9:30 a.m. | GBP | CPI – Prior 2.3% | Expected 2.6%
This is probably the biggest release on the calendar this week which will be watched very closely given its importance with regards to driving monetary policy. Inflation certainly has picked up recently and a stronger than expected release could trigger speculation of an interest rate rise sooner than currently anticipated, whereas a lower than expected release would give the Bank of England further time to assess.
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9:30 a.m. | GBP | PPI – Prior 0.4% | Expected 0.1%
Not usually a significant release but this is essentially one of the measures for underlying inflationary pressures, and should be taken in tandem with the above.
Tentative | NZD | GDT Price Index – Prior 3.6%
Dairy prices have been increasing consistently over the last couple of months, which is good for the New Zealand economy.
Wednesday 17th May
9:30 a.m. | GBP | Average Earnings Index – Prior 2.3% | Expected 2.4%
Again another important indicator for inflation; the more money people have the wealthier they feel and therefore the more they spend, thus generating inflation. Wage growth has been somewhat limited in the UK with companies not being prepared to offer significant pay rises due to the uncertainty of Brexit, and if this continues that’s where we start to get problems with inflation significantly beating wage growth.
1:30 p.m. | CAD | Manufacturing Sales – Prior -0.2% | Expected 0.4%
After a disappointing release last month the bank of Canada will be looking for improvements this month with a forecast of 0.4%.
3:30 p.m. | USD | Crude Oil Inventors – Prior -5.2 million
After a big drop in inventories last week which helped support oil prices, and with the upcoming OPEC Ministerial meetings, another big decline would boost sentiment that OPEC is succeeding in reducing production.
Thursday 18th May
12:50 a.m. | JPY | Preliminary GDP – Prior 0.3% | Expected 0.4%
Figures coming out of Japan have improved over recent months which is great news for an economy that has struggled for well over a decade and has seen unprecedented amounts of accommodative policy (QE). We are looking for a slight improvement on last quarter’s GDP.
2:30 a.m. | AUD | Australia Employment Report – Prior 60.9 K | Expected 5.2 K
Domestic data releases from Australia have been somewhat mixed, however following last months extremely impressive employment report the RBA in its recent statement suggested that concerns around the paper market were beginning to diminish. Another strong employment report would support this and rule out any near-term interest rate cuts, however a miss could significantly cast doubt over the economic outlook.
9:30 a.m. | GBP | retail Sales – Prior -1.8% | Expected 1.2%
The Bank of England will be looking for a much improved figure from last month, especially considering inflationary pressures are building and the Bank of England will want to see this supported by consumer demand. If not this would once again pose a significant risk to the UK economy as fragile retail sales makes it difficult to increase interest rates which is the primary tool used to control increasing inflation.
1:30 p.m. | USD | Philly Fed Manufacturing Index – Prior 22.0 | Expected 18.9
Considered an excellent barometer for manufacturing confidence across the US, we have seen the index reduce from 40 (a 30 year high) to 22 in a matter of 4 months. Another notable decrease could spark concerns around a manufacturing slowdown in the US and potentially impact confidence around further tightening.
Friday 19th May
1:30 p.m. | CAD | CPI – Prior 0.2% | Expected 0.5%
Canada continues to struggle economically not helped by the volatile oil prices. If we saw a somewhat underperforming CPI release this could call into question whether the Bank of Canada would start considering introducing a softer monetary policy to further boost the economy.
1:30 p.m. | CAD | Core Retail Sales – Prior -0.1% | Expected 0.2%
For the same reasons as the above the Bank of Canada will be looking for increases in consumer demand to help bolster inflation.
Source: Content written by Andi Thornton, TradingHUB Chief Analyst – www.TradingHUB.co.uk