Most Important Economic Events of the Week 05.16.2022 – 05.22.2022

Despite the decline on Friday, the DXY dollar index ended the past week with another increase, reaching a new local maximum since January 2003 at 105.05.

Fed Chairman Jerome Powell last Thursday (by the way, he was confirmed last Wednesday in the Senate for a second term as head of the Fed) confirmed that the main task of the central bank is to regain control over inflation. Well, since the divergence between the conditional curves of the monetary policies of the Fed and other major world central banks will increase, we should expect further strengthening of the dollar and, accordingly, the growth of the DXY dollar index. Probably, DXY in this case will head towards the 110.00 mark (at these levels, futures for the DXY dollar index were traded 20 years ago).

Next week will not be full of economic events. Nevertheless, market participants will pay attention to the publication of important macro statistics for China, Canada, USA, UK, Eurozone, Japan, Australia.

Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:

*) new events can be added to the calendar and/or some scheduled events canceled during the coming week

**) specified time – GMT

Monday, May 16

02:00 CNY Retail Sales Index

Retail Sales Index is published monthly by the National Bureau of Statistics of China and measures total retail sales and cash receipts. The index is often considered an indicator of consumer confidence and economic well-being and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the CNY; a decrease in the indicator will have a negative impact on CNY. The previous value of the index (in annual terms) was -3.5% (after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020). Forecast: in April 2022, retail sales in China decreased by -6.0% (yoy). This is weak data after rising in previous months, which indicates a slowing pace of recovery after a strong fall in February-March 2020. If the data turns out to be even weaker, then the CNY could weaken sharply.

During the time period after 12:30 GBP Inflation Report Hearings

The Governor of the Bank of England and members of the Bank of England Monetary Policy Committee will speak in Parliament with comments on the current economic situation and economic prospects. At this time, volatility in pound trades could rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the level of inflation. If the tone of the report is soft, the British stock market will receive support, and the pound will decrease. Conversely, the rigid rhetoric of representatives of the Bank of England in restraining inflation, implying an increase in the interest rate in the UK, will lead to a strengthening of the pound.

Tuesday, May 17

01:30 AUD Minutes from the May meeting of the RB of Australia

This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the labor market in the country, the GDP growth rate, and also shows a “hawkish” attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The bank's soft rhetoric regarding, first of all, inflation puts pressure on the AUD.

During the recent (May) meeting, the RBA raised the interest rate for the first time since November 2010. To curb inflation, which hit a 20-year high (in Q1 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%), the rate was raised by 0.25% to 0.35%, which also beat the forecast of a 0.15% increase. In addition, the RBA signaled the likelihood of a further rates increase in the coming months. Market participants are now pricing in an increase in the RBA interest rate to 2.5% by the end of this year.

"The Board will do everything necessary to ensure that, over time, inflation in Australia returned to the target level," said the governor of the central bank, Philip Lowe. "This will require further interest rate hikes in the future."

According to the RBA forecast, in 2022 headline inflation will be at the level of 6%, while core inflation will accelerate to 4.75%. At the same time, the unemployment rate next year may fall to 50-year lows.

"Given the progress towards full employment and data on prices and wages, some curtailment of the emergency monetary support provided during the pandemic is appropriate," Lowe said.

Economists now expect the RBA to raise its key rate to 2.6% by December 2022 from the current 0.35% and keep it there next year.

Thus, the Australian dollar received an impulse to grow. However, if the published protocol contains unexpected information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.

06:00 GBP A report on the average British salary for the last 3 months. Unemployment rate

On a monthly basis, the UK National Statistics Office (ONS) publishes a report on average earnings covering the last 3 months, including bonuses and no bonuses.

This report is a key short-term indicator of the dynamics of changes in the level of wages of employees in the UK. Earnings growth is positive for the GBP, while a low reading is negative.

Forecast: the May report suggests that the average salary, including bonuses, rose again in the last calculated 3 months (January-March), by +5.4% after an increase of +5.4%, +4.8%, +4.3%, +4.2%, +4.9 %, +5.8%, +7.2%, +8.3%, +8.8%, +7.3%, +5.6%, +4.0% in previous periods); without premiums also increased (by +4.2%) after growth by +4.0%, +3.8%, +3.7%, +3.8%, +4.3%, +4.9%, +6.0%, +6.8%, + 7.4%, +6.6%, +5.6%, +4.6% in previous periods). Thus, the data points to the continued growth of wages, which is a positive factor for the pound. If the data turns out to be better than the forecast and / or previous values, then the pound is likely to strengthen in the foreign exchange market. Data worse than forecast/previous values ​​will have a negative impact on the pound.

Also at this time are published data on unemployment in the UK. It is expected that for 3 months (from January to March), unemployment was at the level of 3.8% (against 3.8%, 3.9%, 4.1%, 4.2%, 4.3%, 4.5%, 4.6%, 4.7%, 4.8%, 4.7%, 4.8%, 4.9%, 5.0%, 5.1%, 5.0% in previous periods).

Since 2012, the UK unemployment rate has declined steadily (from 8.0% in September 2012). This is a positive factor for the pound, the rise in unemployment is a negative factor.

If the data from the UK labor market turn out to be worse than the forecast and / or the previous value, then the pound will be under pressure.

In any case, at the time of the publication of data from the British labor market, an increase in volatility is expected in the pound quotes and on the London Stock Exchange.

09:00 EUR Eurozone GDP for the 1st quarter (second estimate)

GDP is considered to be an indicator of the overall health of the economy. The upward trend in GDP is considered positive for the EUR; a poor result weakens the EUR.

Recently, macro data has been coming from the Eurozone, indicating a gradual recovery in the growth rate of the European economy after a sharp drop in early 2020. Thus, according to the forecast of economists, GDP growth in the Eurozone is expected in the 1st quarter of 2022 by +0.2% (+5.0% in annual terms) with the first assessment of growth by +0.3% (+5.1% in annual terms) after growth by +0.3% (+4.6% in annual terms) in the 4th quarter, +2.2% (+3.9% in annual terms) in the 3rd quarter, +2.2% (+14.3% in annual terms) in the 2nd quarter and a decline of -0.3% (-1.3% in annual terms) in the 1st quarter of 2021, by -0.7% (-4.9% in annual terms) in 4 Q3 2020, +12.5% growth (-4.3% YoY fall) in Q3, -11.8% Fall (-14.7% YoY) in 2 -3.6% (-3.1% YoY) in Q1 2020.

If the data turns out to be weaker than the forecast and / or previous values, then the euro may decline. Better-than-forecast data may strengthen the euro in the short term, although it is still far from the full recovery of the European economy even to pre-crisis levels.

12:30 USD Retail sales. Retail control group

This report (Retail Sales) reflects the total sales of retailers of all sizes and types. Changes in retail sales are the main indicator of consumer spending. The report is a leading indicator, and in the future the data may be greatly revised. A high result strengthens the US dollar, a low one weakens it. A relative decrease in the indicator may have a short-term negative impact on the dollar, while an increase in the indicator will have a positive effect on the USD. In the previous month (March), the value of the indicator was +0.5% (after falling by -1.9% in December, rising by +0.2% in November, +1.8% in October, +0.8% in September, +0.9% in August of 2021), which indicates the still unstable improvement in this sector of the American economy. April forecast: +0.7%.

Retail sales is the leading indicator of consumer spending in the United States, showing changes in retail sales. The Retail Control Group indicator measures volume across the entire retail industry and is used to calculate price indices for most products. A strong result strengthens the US dollar, and vice versa, a weak report weakens the dollar. A slight increase in indicators is unlikely to accelerate the growth of the dollar. The data is worse than the values of the previous period (-0.1% in March, -1.2% in February, +3.8% in January, -3.1% in December, -0.1% in November, +1.6% in October, +0.8% in September, +2.6% in August) may negatively affect the dollar in the short term.

17:00 EUR Speech by ECB President Christine Lagarde

During the speech of the head of the ECB, the volatility of trading increases not only in the euro and European stock indices, but throughout the financial market, especially if Christine Lagarde touches on the topic of the monetary policy of the Central Bank. Any hints at curtailing the QE program in the Eurozone will cause the euro to rise. Lagarde's soft tone and the propensity to continue the extra soft monetary policy of the ECB will negatively affect the euro.

Speeches by the head of the ECB after the bank's meetings have a particularly strong influence on the market. In previous periods, the speech of the head of the ECB in similar situations could cause a change in the euro rate by more than 3%. If Christine Lagarde does not touch upon the topic of the ECB's monetary policy, then the reaction to her speech will be weak.

18:00 USD Speech by Fed Chairman Jerome Powell

Powell's comments could have an impact on both short-term and long-term USD trading if he again touches on the topic of the Fed's monetary policy. A more “hawkish” stance on the Fed's monetary policy is seen as positive and strengthening the US dollar, while a more cautious position is seen as negative for the USD.

If he makes unexpected statements, then the volatility in trading in the financial markets may increase. According to Powell, the current policy of the Fed is sufficient and appropriate to the situation, but the central bank is ready to adjust it in the event of risks that may become an obstacle to achieving its goals.

Financial market participants will carefully study his speech in order to catch signals from him regarding the further actions of the Fed.

23:50 JPY Japanese GDP for Q1 2022 (First Estimate)

GDP is considered an indicator of the general state of a country's economy and estimates the rate of its growth or decline. The report on gross domestic product, published by the Cabinet of Ministers of Japan, expresses in monetary terms the aggregate value of all final goods and services produced by Japan over a certain period of time. An upward trend in the GDP indicator is considered a positive factor for the national currency (yen), while a low result is considered negative (or bearish).

In the previous 4th quarter, the country's GDP grew by +1.1% (+4.6% in annual terms) after falling by -0.9% (-3.6% in annual terms) in the 3rd quarter, growth in the 2nd quarter by +0.5% (+1.5% in annual terms) and falling in the 1st quarter of 2021 by -1.0% (-3.7% in annual terms).

The data point to the uneven recovery of the Japanese economy after its collapse due to the coronavirus pandemic in 2020.

 However, the forecast implies that in the 1st quarter of 2022, Japan's GDP decreased by -0.4% (-1.8% in annual terms), which is a negative factor, primarily for the Japanese stock market. Better-than-expected data is likely to help the Japanese stock market rise.

Wednesday, May 18

06:00 GBP Consumer Price Index. Core consumer price index

The consumer price index (CPI) reflects the dynamics of retail prices for a group of goods and services that make up the British consumer basket. The CPI is a key indicator of inflation. Around its publication will be the main movement of the pound in the foreign exchange market, as well as the London Stock Exchange FTSE100 index.

In the previous reporting month (March), the growth in consumer inflation amounted to +7.0% (in annual terms). The data suggests growing inflationary pressures, which are likely to support the pound. The indicator reading below the forecast / previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to adhere to a soft monetary policy. Forecast for April: +2.6% (+9.1% in annual terms).

The Core CPI of Consumer Prices is published by the Office for National Statistics and determines the change in prices for a selected basket of goods and services (excluding food and energy) for a given period. It is a key indicator for assessing inflation and changes in purchasing preferences. A positive result strengthens the GBP, a negative result weakens it.

In March, the Core CPI (on an annualized basis) increased by +4.4%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. The indicator reading below the forecast and/or previous values may provoke a weakening of the pound. Forecast for April: +6.2% (in annual terms).

12:30 CAD Canadian Core Consumer Price Index

The Core CPI from the Bank of Canada reflects the dynamics of the retail prices of the corresponding basket of goods and services (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products). The inflation target for the Bank of Canada is in the range of 1% -3%. The rise in CPI is a harbinger of a rate hike and a positive factor for CAD. The core consumer price index increased in March 2022 by +1.0% (+5.5% in annual terms), in February 2022 by +0.8% (+4.8% in annual terms), in January +0.8% (+4.3% in annual terms). If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar. Forecast for April: +0.5% (+5.5% in annual terms).

Thursday, May 19

01:30 AUD Employment rate. Unemployment rate

The employment rate reflects the monthly change in the number of Australian citizens employed. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high reading is positive for the AUD, while a low reading is negative. Forecast: In April, the number of employed Australian citizens increased by +25000 (after an increase of +17900 in March, +77400 in February, +12900 in January).

Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate - an indicator that estimates the ratio of the proportion of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decline in the indicator is a positive factor for the AUD. Forecast: unemployment in Australia in April was at 3.9% (against 4.0% in March and February, 4.2% in January), approaching pre-coronavirus levels.

The leaders of the RBA have repeatedly stated that, in addition to the situation in international trade, the Australian economy and the central bank's monetary policy plans are influenced by the indicators of the level of household debt and expenditures, the growth of workers' salaries, as well as the state of the country's labor market. If the values ​​of the indicators turn out to be worse than the forecast, then the Australian dollar may significantly decline in the short term. Better-than-expected data will strengthen AUD in the short term.

02:00 NZD Annual Budget Release

The New Zealand Treasury publishes a preliminary budget for the next year. Volatility in the New Zealand dollar trades, usually, increases at the time of publication of the budget.

Friday, May 20

01:30 CNY People's Bank of China Interest Rate Decision

Since May 2012, the People's Bank of China has been steadily lowering the interest rate, providing support to Chinese manufacturers. The bank last lowered the rate in January 2022 (by 0.1% to 3.70% at the moment).

In 2020, in the context of international trade conflicts and a slowing global economy, the world's largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitive ability of goods exported from these countries.

The People's Bank of China is also in line with this process. The depreciation of the yuan became especially relevant, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative effects of increased duties on the import of Chinese goods to the United States was the depreciation of the national currency of China. An additional strong negative factor was the coronavirus.

It is likely that at this meeting, the People's Bank of China will keep the interest rate at the same level of 3.70%, although a rate cut is also possible.

However, if the People's Bank of China makes unexpected statements or decisions, volatility may increase throughout the financial market. Investors will also be interested in the bank's assessment of the impact of the coronavirus on the Chinese economy and its policy in the near future in this regard.