Week Ahead – Unfashionably late

Time for the Fed to step up

A blockbuster week in store in financial markets and one that begins with bank holiday’s across various countries. Throw in Chinese PMI data over the weekend and it could be a lively start to trading on Monday.

The standout event next week will naturally be the Federal Reserve monetary policy decision on Wednesday when we’re likely to see the first 50 basis point rate hike in more than 20 years. But does the central bank have a surprise up its sleeve after being unfashionably late to the party?

European energy markets will be another key focus next week with the EU reportedly close to agreeing on a Russian oil embargo. At the same time, the Kremlin is taking aim at “unfriendly countries” that refuse to pay for their gas in roubles. Which country will be next to be cut off?

Fed to intensify its tightening efforts

BoE expected to continue raising rates

RBA to finally join the tightening club?


The Fed is widely expected to follow through on delivering a faster pace or rate increases and announce the start of the reduction of their $9 trillion asset portfolio. This should not be a difficult meeting for Fed officials as the Fed has committed itself into delivering a string of rate hikes to finally fight inflation.  The Fed knows its credibility is at stake and they will need to commit to a couple, maybe a few half-point rate increases before scaling down tightening to 25 basis point increases. 

This will be a busy week filled with many major economic data releases, quarterly earnings reports, and Ohio holds a key US senate race to replace Senator Rob Portman who is set to retire.  On Monday, the ISM Manufacturing report is expected to show factory activity posted a small rebound in April and Friday’s nonfarm payroll report to show slower job growth.  The April non-farm payroll headline number is expected to decrease from 431,000 in March to 390,000 and the unemployment rate is expected to remain steady at 3.6%.   


There’s a huge focus on the EU energy market at the moment as a result of the standoff between Brussels and Moscow over natural gas. Poland and Bulgaria have already been cut off due to their refusal to abide by rouble demands. Other countries are less keen which is damaging the unity with which the bloc has punished Russia until now. That said, they are apparently close to agreeing on an oil embargo which will cut off a key source of funding for the Kremlin. How that’s implemented will be key. But all of this means higher energy prices, weaker economies and more pressure on the ECB to hike rates.

Next week offers a lot of economic data, the vast majority of which is tier two and three including final PMIs, unemployment and retail sales. ECB President Christine Lagarde will speak on Tuesday which will be closely followed for interest rate hints. Markets are pricing in multiple hikes this year now, a far cry from what the ECB signalled at the last meeting. June is now huge.


The Bank of England is expected to continue the trend of a rate hike at every meeting with another 25 basis point increase next week. It appeared to be cooling its hawkish rhetoric last time around but given the inflation indicators since, I expect it to retain a hawkish stance on Thursday. Markets are pricing in six rate hikes this year, starting next week. The monetary policy report will accompany the decision with new projections and a press conference.


The CBR cut interest rates to 14% on Friday (17% previously) and hinted at a more modest easing in future (Key Rate in 12.5-14% range). This came as it forecast growth to decline by 8-10% this year and inflation to hit 18-23% in 2022. 

Next week offers the services and manufacturing PMIs which could provide further insight into the impact of the sanctions on the domestic economy. With an oil embargo potentially on the horizon and the Kremlin blocking exports of gas to countries unwilling to pay in roubles, further pain likely lies ahead.

South Africa

Inflationary pressures are continuing to build, as evidenced in the PPI data last week. That will keep the pressure on the SARB to keep raising rates. Next week looks quiet, with the whole economy PMI the only notable release. 


Analysing Turkish inflation data has become a purely academic exercise in light of the CBRT’s decision to ignore it when making its policy decisions. It’s expected to hit 68% when the April data is released (CBRT expects it to peak at 70%) on Thursday and the PPI data may be even worse, having lept nearly 115% in March. CBRT Governor claimed developments show the rate cuts were the right decision. I’m not sure those impacted by them will agree. 


Markets are heavily distorted in Asia this week due to a plethora of holidays. China is closed from Monday until Wednesday meaning any negative developments surrounding covid zero or other geopolitics will be reflected via the offshore USD/CNH and other regional stock markets such as Australia.

We have significant risk this weekend as China releases official manufacturing and non-manufacturing PMIs and the Caixin manufacturing PMI. All have downside risks and with most of Asia, including China and Hong Kong closed on Monday, USD/CNH has significant upside risk, following on from the demolition of the onshore and offshore Yuans versus the US Dollar this week. 

China releases the Caixin non-manufacturing PMI on Thursday, the only other significant data release during the week. If there has been a lot of event risk passing through markets in the first few days of the week, China stock markets could gap quite a long way, up or down when they reopen Thursday, especially if the FOMC surprises in some way in the hours before.


The INR and Sensex have been resilient in the past week; perhaps benefitting from investor inflows leaving China. India is on holiday on Tuesday.

India releases manufacturing PMI and balance of trade on Monday, with non-manufacturing PMI on Thursday. Markets will be looking for a negative impact from India’s nationwide power shortages which could put short-term downward pressure on the Sensex and the INR.


Australia could be a correlation trade for the tier-1 PMI releases from China over the weekend. Poor China data could see the AUD and local equities pressured with most of Asia, ex-Japan closed. Similarly, a decent showing by the China PMIs will have a positive impact. 

Markets, especially currency markets, could face liquidity issues and see sharp moves if the weekend news wire is heavy as Australia and Japan will be the only two major centres open.

Most attention will be focused on Tuesday’s RBA rate decision. A 0.15% hike is fully priced by markets and the clouds from Ukraine and China are weighing heavily on AUD/USD anyway. If the RBA does not hike AUD/USD could fall sharply in the short term. If the RBA hikes and adjusts its guidance to a more hawkish, AUD/USD could potentially see a big move higher.

New Zealand

NZD trading faces liquidity issues in the coming week with the majority of Asia on holiday for most of the week. It may move sharply on Monday as a China correlation trade if China’s weekend PMI data contains surprises. Otherwise, NZD/USD continues to underperform AUD/USD badly as markets continue pricing in an economic slowdown and an RBNZ far behind the inflation curve, forcing it to hike New Zealand into a recession.

New Zealand releases employment, participation, labour costs and the RBNZ Financial Stability Report on Wednesday. All present volatility risk. The RBNZ press conference midday will be monitored for a more hawkish outlook, especially if the labour cost index accelerates higher. 


Japan begins Golden Week and will be closed Tuesday through Thursday. USD/JPY has risen by over 200 points this week and may close above 130.00 this evening. With most of Asia on holiday Monday except Japan, that would be a perfect day for the MOF to conduct some subtle (or not) selling of USD/JPY into low liquidity conditions.

An unchanged BOJ has left the Yen at the mercy of the US/Japan interest rate differential and if US yields rise next week with Japan closed, USD/JPY has significant upside risks.


Singapore is closed Monday and Tuesday. It releases the manufacturing PMI on Wednesday and retail sales on Thursday. Both have downside risks given the China slowdown and inflation eroding consumer confidence. That may force local equities lower, especially as all three heavyweight local banks reported 10% falls in Q1 profits this week.

Like the rest of Asia, the SGD remains under pressure due to a rampant US dollar. That may force the MAS into some buying of SGD to maintain its $NEER corridor with the central bank not due to adjust policy until October.

Economic Calendar

Saturday, April 30

Economic Data/Events

China April Manufacturing PMI: 47.3 expected v 49.5 prior; Non-Manufacturing (Services): 46.0 expected v 48.4 prior; Caixin PMI data

Berkshire Hathaway reports Q1 earnings and Warren Buffett speaks at Berkshire Hathaway’s annual meeting

Sunday, May 1

Economic Data/Events

Milken Institute Global Conference begins

Monday, May 2

Economic Data/Events

US construction spending, ISM manufacturing

Eurozone Markit manufacturing PMI

France Markit manufacturing PMI

Germany Markit manufacturing PMI

New Zealand CoreLogic house prices

Australia CoreLogic house prices, inflation gauge, commodity index, PMI

India Manufacturing PMI 

Australia Manufacturing PMI

Japan PMI, vehicle sales, consumer confidence index

Italy unemployment

Coinbase CEO Armstrong speaks at Milken conference

Tuesday, May 3

Economic Data/Events

Reserve Bank of Australia (RBA) rate decision: Expected to raise Cash Rate Target 15bps to 0.25%

Australia consumer confidence

Eurozone PPI, unemployment

Germany unemployment

Hong Kong GDP

Japan vehicle sales

Thailand business sentiment index, PMI

Mexico international reserves

New Zealand building permits

South Korea CPI

U.K. Markit manufacturing PMI

U.S. factory orders, durable goods, light vehicle sales

Wednesday, May 4

Economic Data/Events

FOMC decision: Expected to raise interest rates by a half-point and announce when they will be reducing their balance sheet

US trade data

Australia PMI, retail sales, home loans

Eurozone retail sales, Markit services PMI

Germany trade

RBNZ releases financial stability report

New Zealand unemployment, commodity prices

Singapore electronic sector index

Spain unemployment

EIA crude oil inventory report

Thursday, May 5

Economic Data/Events

US initial jobless claims

BOE rate decision: expected to raise bank rate 25bps to 1.00%

China Caixin PMI composite, services

France industrial production

Germany factory orders

Australia trade, building approvals

Thailand CPI

India PMI composite, services

Norway rate decision: Deposit rate expected to stay steady at 0.75%

Poland rate decision: Expected to raise rates 75 or 100bps.

Singapore retail sales

OPEC+ regular meeting

Friday, May 6

Economic Data/Events:

US April Change in nonfarm payrolls: 390K expected v 431K prior: unemployment rate: 3.6% expected v 3.6% prior

Fed’s Waller and Bullard discuss monetary policy on a panel hosted by the Hoover Institution

Sweden’s Riksbank releases minutes from its April 27 meeting

BOE chief economist Pill speaks at a monetary policy report briefing

Canada unemployment

Germany industrial production

Japan Tokyo CPI, monetary base

RBA statement of monetary policy

Australia Foreign reserves 

Singapore PMI

Thailand forward contracts

Spain industrial production

Sovereign Rating Updates

Czech Republic (Fitch)

Portugal (Fitch)

Norway (Moody’s)

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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