USD: As It is debatable whether the FED rate decision will be as anticpated as it was this time last week, before the dreaded Nonfarm payroll report was released. However we feel the markets have over-reaceted to the lagging employment indicator and we may find the statement to be more hawkish than expected. So whilst they may not raise in June (or July) the FED may continue to keep the markets in hope of a 'gradual' lift-off which could see repricign of a hike and a stronger USD. Either way, we expect this event to provide clearer direction for the USD Index which continues to behave in a shell-shocked major following last Friday's aggresive sell-off.
CAD: Inflation remains on track around the BoC targets, inflation expectations also remaining elevated. So in the event we do see a downside surprise in this key metric, it would still be arguably an outlier event.
EUR: Eurozone inflation data is the 'final' revision so no significant adjustments are expected. However, it is exactly that sort of complacency which sent markets into turmoil on Friday when they were 'expecting' 161k jobs to be created in US. So a notable downside revision on inflation will likely have a similar effect and drive EUR lower as further QE would be anticipated.
GBP: We can probably skip straight past the BoE rate decision as the odds of them making changes were unlikely, even without the pending EU referendum. The Brexit polls continue to track alongside EURGBP very well, helping to support it if No is in the lead and switching back to bearish if yes in in the lead.
China: Industrial production has been making signs of a potential base after declining since 2009. If this base continues to hold or even pick-up this could have a positive impact on GDP or, at the very least, help to slow its decline.
JPY: A quieter calendar week from Japan follows on from a week which saw Q1 GDP revised higher along with indicators such as economy watcher’s survey and the leading economic index also ticking higher. Machinery orders contracted further but we do not see this reason for monetary policy to be changed this week. So overall this could be a relatively quiet calendar week for Japan which comprises of industrial production and monetary policy meeting.
Industrial production is a revision so, excluding any major changes, we are not likely to see significant market reactions.
AUD: MI inflation expectations peaked in Dec '15 at 4% and now sit around 3.2%, trading the RBA's trimmed mean inflationary read lower. It will be interesting to see if the realised inflation now weighs down on expectations in this read, as part of the self-fulfilling tendency of markets.
Business confidence remains elevated around 5 but we may see this tick higher as RBA effectively removed their easing bias over the near-term, to mark a floor on the cash rate at 1.75%.
NZD: Export prices remain "below break-even levels for most farmers" according to RBNZ, so we will monitor to see any signs of a bounce in the GDP index. However early indicators are of subdued growth so not enough to counter the higher exchange rate and low inflation. We believe a cut on the table at their next meeting and high chances of verbal interventions of the Kiwi Dollar remains elevated at current levels. If FED to remain dovish then this increases the odds of a cut by RBNZ.
The PMI index remains elevated at 56.5 with the new orders component at a 3-month high of 60. The only drag on the headline figure is the employment index which has contracted 3 consecutive months.