Rate decisions in the US and UK lead event risk this week, while talks between the US and its major trading partners remain in focus, along with hopes of a cooling in Sino-US trade tensions.
The Federal Reserve is widely expected to keep rates on hold at 4.25-4.50 percent on Wednesday, with markets pricing over 90 percent chance of no change amid uncertainty on the economic impact of US tariffs. The Fed statement and press conference will be key for markets.
US data begins with the final reading of S&P composite and services PMIs, then ISM services PMI, the trade balance and weekly jobless claims. Fed officials John Williams, Austan Goolsbee and Beth Hammack are due to speak.
The Bank of England is expected to cut rates a further 25 basis points to 4.25 percent on Thursday, according to all 67 economists polled, as the economy softens. The BoE monetary policy report and summary will be closely watched.
Monday is a UK holiday. Industrial and manufacturing production, the NIESR monthly GDP tracker, S&P construction PMI and final readings of services and composite PMIs are the significant data releases. BoE Governor Andrew Bailey and MPC member Huw Pill speak on Friday.
It is a low-key week in Japan with holidays on Monday and Tuesday. The data releases are limited to final services and composite PMIs, household spending and overtime pay. The Bank of Japan’s March meeting minutes are due on Thursday.
The eurozone has retail sales and final PMI readings while Germany has factory orders, industrial output and trade. The central banks of Sweden and Norway announce their rate decisions on Thursday.
China has a holiday on Monday. Caixin April services PMI is due Tuesday, but the key releases are April trade and inflation data on Friday and Saturday, which are likely to reveal how the trade war is darkening the economic outlook further. Bank lending data may be released.
Canada publishes trade and employment data. Bank of Canada Governor Tiff Macklem discusses the Financial Stability Report at a press conference on Thursday.
New Zealand has Q1 employment data and the central bank’s bi-annual Financial Stability Report on Wednesday. Australia has no major data due.
The Federal Reserve meeting is set to test the US stock market’s sharp rebound, with investors hoping the central bank is poised to resume lowering interest rates in the months ahead.
During the rally, stocks have erased the slump set off by President Donald Trump’s sweeping tariffs. After gaining on Friday, the S&P 500 was up 0.3 percent since April 2, when Trump’s “Liberation Day” tariff announcement sent stocks plunging and led to some of the market’s most volatile swings in 50 years.
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While the Fed is widely projected to hold borrowing costs steady in its monetary policy statement on Wednesday, market pricing indicates expectations that the central bank could cut as soon as June, although odds of such a move dimmed following Friday’s solid US jobs report.
“The Fed is one of the few levers that can be pulled in a timely fashion that can support market activity,” said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. “If they start to signal that their inflation concerns are waning, that suggests they are closer to a cut, and I think that will be well received by markets.”
Trump’s tariffs loom over policy decisions for central bank officials weighing concerns about a potential economic downturn against worries that tariffs will drive inflation higher.
