Week Ahead – Recession fears increasing

Plenty more to come

It’s been another turbulent week in financial markets and there’s nothing to suggest it’s going to ease up any time soon. For months investors have been asking themselves how many rate hikes are too many? What will tip the economy over the edge and into a recession? This week we may have got a clue as markets went into risk-averse mode and the dollar slipped while yields declined and gold rallied. Are recession fears now creeping in?

Economic surveys next week could tell us just how concerned businesses are about inflation and how bad they expect it to get. Meanwhile, we’ll hear from various central bank policymakers about their views on the latest data and whether they are still confident that a tightening-induced recession can be avoided.

The week starts with elections in Australia over the weekend which could make Monday’s open all the more interesting. We’ll also get rate decisions from New Zealand and Turkey, as well as minutes from the last Fed meeting. Needless to say, it promises to be another fascinating week.

Weaker US data on the way?

CBRT to hold despite inflation nearing 70%

Australian election too close to call


In the US, a theme of weaker economic data is expected for the upcoming week.  Risk appetite will get challenged as the likely story will be of weaker manufacturing activity, housing data, personal spending, and a very slow deceleration with pricing pressures. The Fed minutes for the May 4th meeting are already dated and will have less impact as recent Fed speak supports a half-point rate increase for the next meeting.  The Fed’s Raphael Bostic will speak about the economic outlook on Monday and Esther George will give a speech on Wednesday. Both support raising rates by 50-basis points. 

Many traders will focus on President Biden’s five-day Asia trip that will include a press conference with South Korean President Yoon Suk Yeol, a meeting with Japanese Prime Minister Fumio Kishida, and the Quad summit in Japan. 


The bulk of the tier one data comes early next week, with bank holiday’s on Thursday ensuring a quieter end. PMI data will be poured over for signs of slowing growth and increasing inflationary pressures. The ECB is late to the hiking party but the first could come as soon as July, after which a number could follow in quick succession. Further hints will be sought from various policymaker appearances. 

The bloc is continuing to work towards a Russian oil embargo with Hungary still standing in the way.


The UK is heading for a recession and double-digit inflation, both of which the BoE has resigned itself to. The cost-of-living crisis has caught up with the economy and will weigh for many months to come despite the efforts of the central bank which started tightening late last year, much sooner than many of its peers. Governor Bailey will speak again on Monday but having made multiple appearances recently, I’m not sure what value he can add.

The only data of note in an otherwise quiet week is the PMIs on Tuesday which could offer further clues on the economy and inflation. Forecasts suggest the slower growth across the board. 


We’ll hear from CBR Chair Elvira Nabiullina on a couple of occasions next week. The central bank is continuing to unwind its emergency rate hikes imposed in the aftermath of the Western sanctions as the currency has fully recovered and inflation is expected to perform much better than anticipated. Nabiullina may shed further light on this.

South Africa

A quiet week in store after the SARB on Thursday delivered its first super-sized hike of 50 basis points. Coming after raising rates by 25 basis points at three previous meetings, the acceleration reflected the greater inflation risks to the economy, with the current rate sitting right at the top of the 3-6% band. The repo rate now sits at 4.75% and there’s room to move further, with inflation now only seen returning to the mid part of the range at the end of 2024, later than previously anticipated. 


The CBRT is expected to leave interest rates unchanged at 14% on Thursday, despite inflation hitting 69.97% in April. 


China continues to battle the pandemic with a rigid zero-Covid policy. The government has imposed strict lockdowns in Shanghai and other major cities, which have hampered economic growth and disrupted global supply chains.

As Covid cases have been falling, China is slowly easing the pandemic restrictions. Authorities have designated June 1st as a tentative date for Shanghai to fully reopen, but this date will likely be postponed if there is an increase in the number of Covid cases.


The RBI opted for an off-cycle hike earlier this month, saying that it needed to respond urgently to rising inflation. Although the markets were expecting a rate hike, the timing of the 40 basis point increase was a surprise. This was the RBI’s first rate hike since August 2018, with additional rate hikes widely expected at upcoming meetings. The next meeting is scheduled for June 6-8.


Australia holds a federal election on Saturday (May 21st), with the election campaign focusing on economic issues.

Prime Minister Scott Morrison’s centre-right coalition has closed the gap with the opposition Labour party, led by Anthony Albanese. The latest opinion polls show that the race is too close to call.

PMIs and retail sales among the notable economic releases next week.

New Zealand

New Zealand kicks off the week with retail sales for Q1 on Tuesday. Consumers were in a spending mood in Q4 of 2021, as retail sales jumped 8.6% QoQ. 

The RBNZ holds a rate meeting on Wednesday. The central bank has been aggressively raising interest rates in order to curb spiralling inflation, which hit 6.9% in Q1. The RBNZ is expected to increase rates by 0.50%, bringing the official cash rate to 2.00%.

On Friday, New Zealand releases the May ANZ consumer confidence. The RBNZ will be keeping a close eye on inflation expectations, which remain above its inflation target of 1%- 3%.


Core inflation hit 2.1% last month, above the BoJ target for the first time since 2008 (barring a period in 2015 after a sales tax hike). It isn’t expected to last though with energy being a key driver of the increase and wages not rising nearly as much. The central bank is expected to remain committed to ultra-loose policy even as it battles the market on its yield curve control policy tool. 


Singapore releases its inflation report on Monday. April CPI is expected to rise 0.1% compared with 1.2% previously. On an annualized basis, CPI is forecast to climb 5.6% against 5.4% a month earlier while core inflation is expected to exceed 3%. Higher core inflation is a key reason why the Monetary Authority tightened policy in April.

On Wednesday, Singapore releases GDP for Q1, followed by industrial production for April on Thursday.

Economic Calendar

Saturday, May 21

Economic Data/Events

Australia’s national election

President Biden holds a press conference with South Korean President Yoon Suk Yeol in Seoul

Sunday, May 22

Economic Data/Events

World Economic Forum begins in Davos, Switzerland

Monday, May 23

Economic Data/Events

Chicago Fed National Activity Index

Germany IFO business climate

President Biden meets Japan PM Kishida in Tokyo

Singapore CPI

Fed’s Bostic discusses the economic outlook at an event hosted by the Rotary Club of Atlanta

Fed’s George speaks at an agricultural symposium

ECB’s Holzmann and Nagel, BOE Gov Bailey discuss inflation at an Austrian National Bank conference in Vienna

World Gas Conference in Daegu, Korea begins

Tuesday, May 24

Economic Data/Events

President Biden attends Quad summit with Japan, Australia and India in Tokyo

DC Blockchain Summit in Washington, DC

NOAA releases its initial outlook for the 2022 Atlantic hurricane season

Sweden’s Riksbank publishes its Financial Stability Report 2022

Eurozone S&P Global PMIs

France S&P Global PMIs

Germany S&P Global PMIs

Indonesia rate decision

Mexico international reserves

Nigeria GDP, rate decision

UK S&P Global PMIs

US new home sales, S&P Global PMIs

Wednesday, May 25

Economic Data/Events

FOMC Minutes

US Durable goods

RBNZ Rate Decision: Expected to raise Official Cash Rate by 50 bps to 2.00%

RBNZ Governor Adrian Orr speaks following the rate decision

The Treasury’s Office of Foreign Assets Control will let a sanctions exemption that’s allowed US investors to receive payments on Russian debt lapse

ECB’s Holzmann speaks at the Central & Eastern European Forum in Vienna

Bank of Finland Governor Rehn speaks at the bank’s annual payments forum

ECB publishes its Financial Stability Review

Germany GDP

Mexico trade, GDP

Singapore GDP

EIA Crude Oil Inventory Report

Thursday, May 26

Economic Data/Events

US GDP, initial jobless claims

US House Financial Services Committee has a hearing on “Digital Assets and the Future of Finance: Examining the Benefits and Risks of a US Central Bank Digital Currency”

New Zealand PM Ardern speaks at Harvard University’s 371st Commencement ceremony 

Mexico central bank monetary policy minutes

Canada retail sales

Singapore industrial production

Turkey rate decision: Expected to keep One-Week Repo Rate unchanged at 14.00%

Hungary one-week deposit rate

Friday, May 27

Economic Data/Events

US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment

NATO Parliamentary Assembly spring session begins

President Biden addresses US Naval Academy Class of 2022

Australia retail sales

China industrial profits

Japan Tokyo CPI

Sovereign Rating Updates:

– Italy (Fitch)

– Sweden (Fitch)

– Switzerland (Moody’s)

– Turkey (Moody’s)

– Poland (DBRS)

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam