May Week 1, Looking Back and Looking Forward

May Week 1, Looking Back and Looking Forward

Looking back to the last week:

Recent events include ongoing concerns about a possible US government debt default leading to a record high cost to insure it. Asia's markets experienced a mini-flash crash causing oil prices to hit a 17-month low and gold prices to soar to a record high before both markets quickly recovered. The RBA surprisingly implemented a 25bp hawkish hike due to high inflation rates, which they hope to lower to 3% in two years. Strong employment figures in New Zealand are putting pressure on the RBNZ to raise their rates by at least 25 bp at their upcoming meeting. The ECB raised their interest rates by 25bp to 3.75% with a nearly unanimous decision, and more hikes may follow. The Fed also raised their rates by 25bp to 5.25%, and although Jerome Powell pushed back against rate cuts this year, markets are still anticipating them. The US employment data was mixed with a strong ADP print but higher initial claims, causing uncertainty about monetary policy. Lastly, China's PMI surveys mostly disappointed and suggest that the reopening of the economy has lost momentum.

Looking forward to the next week:

Looking ahead, there are several events that traders should keep an eye on. These include more US inflation data, key loan and trade figures from China, and a Bank of England meeting. With the RBA, ECB, and Fed meetings behind us, attention can shift to these upcoming events. While concerns about a US default and regional banking crisis persist, traders should also watch out for inflation expectations released by the RBNZ and Australia's federal budget. In the past week, the RBA unexpectedly raised interest rates by 25bp, the ECB hiked rates by 25bp, and the Fed also raised rates by 25bp. Mixed employment data from the US and disappointing PMI data from China also impacted the markets.

The week ahead (calendar):

Monday 8th May:

  • Public holiday in the UK
  • US: Employment Trends Index (ETI), Wholesale Trade, Survey Of Consumer Expectations, Oil Price Dynamics Report
  • EU: Sentix Investor Confidence, German Industrial Production
  • Japan: BOJ release monetary policy minutes
  • Australia: Building Approvals

Tuesday 9th May:

  • US: NFIB Small Business Optimism Index, API's Weekly Statistical Bulletin (WSB)
  • EU: French Trade Balance
  • China: Trade balance
  • Japan: Household spending
  • Australia: NAB business conditions, Westpac Consumer Sentiment
  • New Zealand: Electronic card transactions
  • Other: API's Weekly Statistical Bulletin (WSB)

Wednesday 10th May:

  • US: Consumer Price Index, Real Earnings, Underlying Inflation Gauge,
  • Canada: Building Permits, NY Fed John Williams
  • EU: German CPI (Final)
  • Japan: Indexes of Business Conditions (Preliminary), Foreign Reserves, Coincident Index, Leading Indicator
  • New Zealand: Food price index

Thursday 11th May:

  • US: Initial Claims, Producer Prices, Weekly Economic Index
  • UK: BOE interest rate decision
  • China: Consumer Price Index, Producer Price Index
  • Japan: BOJ release summary of opinions, Foreign investment
  • Australia: Weekly Payroll Jobs and Wages in Australia, Monthly Business Turnover Indicator
  • New Zealand: NZ Finance Minister to speak ahead of the Budget
  • Other: OPEC Monthly Report

Friday 12th May:

  • US: Michigan Consumer Survey (Preliminary), Imports and Exports, Survey of Professional Forecasters, SCE Household Spending, Fed’s Bullard and Jefferson speak
  • EU: French CPI (Final)
  • UK: BOE Huw Pill and Fergal Shortall give a briefing on the Monetary Policy Report, GDP, Industrial/Manufacturing output, Trade Balance
  • New Zealand: Inflation Expectations, Services PMI, NZ Finance Minister to provide a pre-budget speech, International migration and migration


Notable events and themes for the week ahead include the US debt ceiling and banking crisis, US CPI data, BOE meeting, China loan growth data and trade balance, and Australia's budget.

US debt ceiling and banking crisis

The concerns of the US debt ceiling and banking crisis are still present and affecting traders. More regional banks are considering options to sell or slow the rate of deposit outflows, and CEOs are requesting additional protection to safeguard deposits. As a result, regional banks are leading the way lower in the markets. Furthermore, there is a growing fear that the US government may default on its debt, as seen in the record-high 1-year credit default swaps of US government debt. These factors contribute to fragile sentiment, limited index gains, plummeting oil prices, and volatile gold trading.

US CPI data

The latest Fed meeting did not bring any major changes besides confirming the expected pause in rate hikes. However, the Fed's future actions are still influenced by US inflation data, particularly if services-less energy inflation remains stubbornly high. A hot inflation print on Wednesday could shake up the markets and challenge the expectations of rate cuts. Therefore, US inflation data will remain an essential data point for traders in the coming months.

China's data

China's 2023 GDP target of approximately 5% has been met with scepticism. Official data from the National Bureau of Statistics China suggests that the PMIs topped in Q1, which raises concerns about weak growth in Q2 and onwards. Traders will focus on new loan growth to gauge domestic demand and whether the rise of exports can sustain growth. However, doubts remain regarding the latter.

BOE meeting

The Bank of England is expected to raise rates by 25bp to 4.75%. In March, they had also raised the same amount with a 7-2 vote in favour, and Governor Bailey warned that it might not be the peak rate. Goldman Sachs has also revised its peak rate to 5%, allowing room for another hike. Investors will closely monitor the MPC votes, particularly if fewer than 7 members vote in favour of the hike, indicating wavering confidence in future hikes.

Australian budget

In the upcoming budget, the Australian government aims to bring down inflation while easing living costs. The Treasurer faces the challenging task of balancing both goals. Unemployment at 50-year lows and higher commodity prices have improved the budget position, and March figures showed an underlying cash surplus. However, Goldman Sachs expects this surplus to be short-lived. The budget may include targeted cost-of-living support such as energy relief and increased benefits for specific groups. Additionally, the Treasurer is expected to release a statement on "Measuring What Matters," which could reveal longer-term policy shifts and priorities for future budgets.


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