The Week Ahead: US Personal Income and Outlays Report to Shift Fed Rate Cut Bets

The US Dollar

US consumer confidence and house price figures will put the US dollar in focus on Tuesday (May 28). The CB Consumer Confidence figures will likely impact the US dollar more. Consumer confidence trends can dictate consumer spending and influence demand-driven inflationary pressures.

Q1 2024 GDP and jobless claims data will draw investor attention on Thursday (May 30). Unless there is a downward revision to the GDP figure, the jobless claims could influence the Fed rate path more. Tight labor market conditions may support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

On Friday (May 31), the all-important Personal Income and Outlays Report will attract investor attention. Steady Core PCE Price Index numbers and higher personal income/spending could fuel speculation about a Fed rate hike.

Amidst falling investor bets on a September Fed rate cut, investors should monitor FOMC member chatter. FOMC members Loretta Mester (Tues), Neel Kashkari (Tues), John Williams (Wed/Thurs), and Raphael Bostic (Fri) are on the calendar to speak.

The EUR

On Monday (May 27), the German Ifo Business Climate Index could influence buyer appetite for the EUR/USD. Recent economic indicators from Germany signaled an improving macroeconomic environment. An upward trend in the Index would support expectations of a pickup in economic activity.

The German economy will be in focus again on Tuesday (May 28), with wholesale prices likely to signal an improving demand environment. A less marked decline in wholesale prices could give investors more signs of a German economic recovery.

On Wednesday (May 29), German consumer confidence and inflation figures also warrant investor attention. Softer inflation numbers could support post-June ECB rate cuts. However, sub-components of the GfK Consumer Confidence Indicator need to show a willingness for consumers to spend to signal a pickup in private consumption.

Eurozone economic sentiment and unemployment numbers need consideration on Thursday (May 30). A steady unemployment rate and higher economic sentiment numbers could support buyer demand for the EUR.

On Friday (May 31), German retail sales, French GDP, and Eurozone inflation figures will influence the ECB rate path.

Beyond the numbers, Investors should monitor ECB chatter. Views on post-June interest rate cuts need monitoring.

The Pound

On Friday (May 31), UK house prices and mortgage lending figures could impact buyer demand for the Pound. However, the numbers will unlikely influence the Bank of England interest rate trajectory.

Bank of England commentary will warrant investor attention. Views on the timing of an interest rate cut will influence GBP/USD price trends.

The Loonie

On Monday (May 27), wholesale sales data will put the Loonie in the spotlight. Further declines in wholesale sales would signal a weak demand environment and support a less hawkish BoC rate path.

However, Q1 GDP numbers on Friday will likely impact the Loonie more. Softer-than-expected numbers could fuel investor expectations of a BoC rate cut.

The Australian Dollar

Retail sales figures will put the Aussie dollar and the RBA in focus on Tuesday. A pickup in retail sales may fuel demand-driven inflation and speculation about an RBA rate hike.

However, on Wednesday (May 29), the Australian Monthly CPI Indicator will likely impact the Aussie dollar more. Sticky inflation could influence the RBA interest rate trajectory.

Housing sector data will draw investor interest on Thursday (May 30) and Friday (May 31).

With retail sales and inflation in focus, investors should track RBA commentary throughout the week. RBA Chief Economist Sarah Hunter is on the calendar to speak on Thursday.

The Kiwi Dollar

On Wednesday, business confidence numbers will put the NZD/USD in focus. A pickup in business confidence may support hiring. Tighter labor market conditions may increase wages and disposable income.

Other stats include building permit figures. However, barring an unexpected slide in building permits, the housing sector data will unlikely influence the RBNZ.

The Japanese Yen

On Wednesday (May 29), consumer confidence figures for May will impact buyer demand for the Japanese Yen. Upward trends in consumer confidence could signal a pickup in household spending. Household spending would drive demand-driven inflation and allow the Bank of Japan to hike interest rates.

On Friday, Tokyo inflation, unemployment, and retail sales figures also warrant investor attention. The BoJ would need tighter labor market conditions and upward trends in retail sales and consumer prices to begin rate hike discussions.

Beyond the numbers, investors should monitor Bank of Japan commentary. Views on a June interest rate hike need consideration.

Out of China

On Monday, industrial profit numbers for April will influence market risk sentiment. Recent economic indicators from China signaled a pickup in industrial production. Higher profits could signal an improving macroeconomic environment and further ease deflationary pressures.

On Friday, NBS private sector PMIs for May will also impact buyer demand for riskier assets.