Focus This Week: Canadian and UK Inflation, FOMC Minutes
GBP
GBP/USD has dropped by 0.1% to 1.2696 (interbank) whilst GBP/EUR is currently trading at 1.1685 (interbank).
Last week, the Pound saw an uptick following unexpectedly robust employment figures.
The focus now shifts to the U.K. inflation data for April, set to be released on Wednesday, with analysts forecasting a significant deceleration in the annual inflation rate to approach the BoE's target of 2%.
Analysts also speculate that services inflation might surpass BoE estimates, potentially delaying the anticipated initial rate cut from June to August. However, this projection is subject to change based on upcoming data, which could significantly sway market expectations about the timing of the rate reduction.
Bank of England Governor Andrew Bailey is slated to speak tomorrow, potentially shedding more light on the central bank's outlook and forthcoming policy adjustments. Additional key data this week will include Retail Sales and PMI figures.
Today’s Events (GMT):
10:00 - BoE MPC Member Broadbent Speaks
EUR
EUR/USD has edged up by 0.1% to 1.0874, just shy of the near two-month peak of 1.0895 seen last week.
ECB official Isabel Schnabel remarked that rate cuts could commence in June, although further reductions in borrowing costs are clouded by economic uncertainties.
Expectations are set for the ECB to initiate rate cuts in June, though the market remains uncertain about the extent of further rate reductions throughout the year.
Key upcoming economic indicators include Germany’s Producer Prices on May 20, the EMU Balance of Trade on May 21, and the preliminary Manufacturing and Services PMIs for Germany and the eurozone, along with the flash Consumer Confidence index for the eurozone on May 23. Final Q1 GDP Growth Rate figures for Germany are due on Thursday.
No significant events are scheduled for today
USD
The dollar index has slightly increased to 104.355, a modest rise from a five-week low earlier this week.
The dollar experienced a downturn last week after a deceleration in U.S. inflation heightened prospects for Federal Reserve rate cuts this year.
However, a recovery is underway as several Fed officials emphasized the need for more definitive evidence of declining inflation, beyond the modest easing observed in April.
The minutes from the early May Fed meeting, due on Wednesday, are highly anticipated by traders seeking additional hints on the timing of potential rate cuts by the U.S. central bank.
This week will also feature speeches from multiple Fed officials, including Raphael Bostic, Governors Michael Barr, Christopher Waller, and Philip Jefferson.
Today’s Events (GMT):
13:45 - FOMC Member Bostic Speaks
14:00 - Fed Vice Chair for Supervision Barr Speaks
14:00 - Fed Waller Speaks
19:00 - FOMC Member Mester Speaks
CAD
USD/CAD continues to fall, now trading at 1.3605 (interbank).
Oil prices have slightly increased in Asian markets on Monday as traders await updates on the rescue efforts for Iran’s President following a helicopter accident. Brent crude is up 0.3% at $84.19 a barrel, while West Texas Intermediate (WTI) has risen 0.2% to $79.70 a barrel.
The BoC is expected to start rate cuts in June or July, ahead of the Fed's anticipated adjustments. This week's spotlight will be on Canada’s CPI report, potentially guiding the next rate decision. The bank will require signs of declining inflation before committing to a rate cut next month.
Market odds are currently near 40% for a BoC rate reduction in June, which could place some pressure on the Canadian dollar and limit further declines in the USD/CAD pair.
No significant events are scheduled for today.
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