Key Economic Events This Week
- Sunday: OPEC+
- Monday: UK May Bank Holiday, Japan’s Greenery Day, Turkish Inflation (April), Global Manufacturing PMI (April), US Factory Orders (March)
- Tuesday: RBA Policy Announcement (May), BCB Minutes (April), Japan’s Children’s Day holiday, Swiss Inflation (April), US Building Permits Final (March), Canadian Balance of Trade (March), Canadian PMI (April), US PMI Final (April), US ISM Services (April), US JOLTS (March), US New Home Sales (March), US RCM/TIPP Economic Optimism (May), New Zealand Unemployment Rate (Q1)
- Wednesday: ECB Wage Tracker (May), Japan’s Constitution Memorial Day holiday, South Korean Inflation Rate (April), Chinese RatingDog PMI (April), Swedish Inflation (April), EU PMI Final (April), Italian Retail Sales (March), EZ PPI (March), Canadian Ivey PMI (April), US ADP Employment (April), US Treasury Refunding Announcement
- Thursday: Norges Bank Policy Announcement (May), Riksbank Policy Announcement (May), CNB Policy Announcement (May), Banxico Policy Announcement (May), CBR Minutes (May), UK Local Elections, BoJ Minutes (March), Australian Balance of Trade (March), German Factory Orders (March), French Balance of Trade (March), EZ Construction PMI (April), EZ Retail Sales (March), US Challenger Job Layoffs (April), Mexican Inflation (April), US Jobless Claims (May 2)
- Friday: Japanese Services PMI Final (April), German Balance of Trade (March), German Industrial Production (March), Brazilian Inflation (April), Canadian Jobs Report (April), US Jobs Report (April), University of Michigan Survey Prelim. (May)
Focus on OPEC+ Meeting
The upcoming May 3rd meeting of OPEC+ is drawing considerable attention, particularly following the UAE’s formal exit effective May 1st, which has removed a significant producer from the quota constraints and raised questions about the organization’s unity. The remaining “OPEC-7” members are projected to advance with a modest output increase of approximately 188,000 barrels per day in June, adjusted down from an anticipated 206,000 due to the UAE’s exit. However, this step appears largely symbolic amidst disruptions in the Strait of Hormuz that are curtailing actual export capabilities. The primary aim remains to project stability and uphold credibility despite underlying tensions within the group, though there exists a risk of a pause should conditions worsen further.
Anticipated RBA Policy Announcement
Market participants are gearing up for a likely 25 basis point rate hike from the Reserve Bank of Australia on Tuesday, with Westpac forecasting an increase to 4.35%. This would represent the third consecutive rate rise, motivated by persistent inflationary pressures, a robust labor market, and signs that Australia’s economy was performing stronger than previously anticipated prior to geopolitical tensions in the Middle East. The RBA has indicated a need for continued vigilance on inflation, which remains above its target, and the recent data on wages and demand supports a tightening stance. Nevertheless, the significant uncertainty surrounding inflation driven by energy price shocks poses a critical question for policymakers: should immediate action be undertaken or should a more measured approach be adopted? Financial markets currently assign an 81% likelihood of a hike during the upcoming meeting.
Swiss Inflation Report
On Tuesday, Swiss inflation statistics are expected to align with broader trends observed in other economies, showcasing headline price increases but limited impact on core components at this stage. March’s data revealed a cooler-than-anticipated headline figure, primarily influenced by transportation costs, especially in energy and fuel sectors. The April report will shed further light on how the recent energy shock is filtering through to Swiss inflation metrics. The Swiss National Bank is expected to maintain its policy rate at 0.00% for the foreseeable future as it navigates these dynamics.
Insights into US ISM Services PMI
The US ISM Services PMI, due out on Tuesday, serves as a pivotal indicator of service sector activity. The latest flash index showed a rise to 51.3 in April, reaching a two-month high, although the details suggest a prevailing sluggishness in this sector. The slight rebound only partially offsets March’s downturn, with service activity marking the second-lowest expansion rate of the past year. New business for service providers has seen marginal growth, hampered by decreased export demand and ongoing uncertainties related to geopolitical tensions. Notably, pricing pressures within the service industry have surged, reaching the highest levels in over three years, suggesting a complex environment fueled by escalating energy and commodity costs.
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This Wednesday, the US Treasury will unveil its Q2 financing estimates, providing crucial insights into market expectations. Previously, it was projected that the Treasury would borrow USD 574 billion in Q1, maintaining a strong cash balance. For Q2, the focus will center on the estimated USD 109 billion in privately-held net marketable borrowing and the issuance guidance. Market observers will be keen to assess any shifts in auction sizes and buyback strategies that could signal the Treasury’s intentions for managing liquidity amid ongoing volatility. Additionally, potential future adjustments concerning the Federal Reserve’s balance sheet policies could influence long-term issuance strategies, though current guidance suggests stability in auction sizes.
Key Developments from Norges and Riksbank Meetings
On Thursday, Norges Bank is anticipated to raise its policy rate, maintaining momentum towards tighter monetary policy amid rising inflation, which recently surged to 3.6% year-over-year. The Bank previously signaled its intent to increase rates in upcoming meetings, underlining the need for action in response to inflation pressures. Conversely, the Riksbank is expected to hold steady at 1.75%, reflecting its cautious stance amid Sweden’s disinflationary trends. With inflation metrics undershooting expectations, the Riksbank may prioritize a steady approach, particularly as labour market indicators remain stable. However, the evolving geopolitical landscape may prompt a reassessment of this strategy as the year progresses.