Week Ahead: US Inflation Data to Shake Fed Rate Cut Bets
XM Group | May 10, 2024 08:26AM ET
- Fed rate-cut speculators rest hopes on US inflation data
- After dovish BoE, pound traders turn to UK job numbers
- Will a strong labor market convince the RBA to hike?
- More Chinese data on tap amid signs of slow Q2 start
Spotlight turns to US CPI numbers
At last week’s meeting, the Fed appeared less hawkish than expected, with Chair Powell ruling out rate hikes and hinting that they are still leaning towards cuts. The softer-than-expected jobs report for April corroborated that view, which was echoed by more policymakers this week.
The only official expressing a different view was Minneapolis Fed President Neel Kashkari, who said that interest rates may need to stay at current levels all year and that the bar for a rate hike, although quite high, is not infinite.
With all that in mind, next week, traders will turn their attention to the US CPIs for April, due out on Wednesday. According to the S&P Global PMIs, output prices increased again at a solid but slower pace during April compared to March, suggesting that the risks surrounding Wednesday’s numbers may be titled somewhat to the downside. On top of that, the y/y change in oil prices declined and got closer to zero, which adds to the downside risks of the headline rate.
Nonetheless, even if Japanese authorities step in again near that zone, a trend reversal would still be unlikely as another quarter of contraction could raise speculation that the next hike by the BoJ would be delayed even more. For the yen to stage a decent recovery, GDP data may need to reveal accelerating growth, encouraging market participants to ramp up their summer hike bets.
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