The week ahead promises to be an eventful one for financial markets, with key economic releases related to inflation and growth on the docket for both the US and Europe. This data will be closely scrutinized by traders and investors as it carries significant implications for the policy outlook of major central banks like the Federal Reserve and European Central Bank.
Assets that could see volatility based on these events include the EUR/USD currency pair, US equity indices, and European stocks.
🇺🇸 CB Consumer Confidence Index — May 28, at 17:00 GMT+3
The Conference Board's Consumer Confidence Index for May is one of the major economic data releases this week. The index measures consumer attitudes and perspectives on the economy.
The consensus forecast is for the Consumer Confidence Index to come in at 76.3, down sharply from 97.0 in April. A reading below 100 indicates pessimism among consumers about the overall health of the economy. Such a sizable drop in consumer confidence could weigh on the EUR/USD exchange rate, as a less upbeat consumer outlook in the US could strengthen the US dollar versus the euro.
The data may also put pressure on US stocks, as consumer spending accounts for around 70% of US economic activity. If consumers are feeling less optimistic, it raises concerns they could rein in spending, impacting corporate revenue and earnings for consumer-facing companies.
🇺🇸 FOMC Member Williams Speech — May 29, at 20:45 GMT+3
The speech by New York Fed President John Williams will be closely watched for potential signals on the Federal Reserve's next policy move after raising rates to 5.50% at the last meeting. Investors are looking for clarity on whether the Fed will keep rates on hold or start cutting them in the coming months.
At the previous meeting, the Fed acknowledged that "eventually" there will likely need to be rate cuts, although the timing remains uncertain. Williams' comments will provide an updated perspective on how policymakers are assessing the economic data flow. Key points he may reiterate include moderating job growth, the Fed's data-dependent approach, concern over stubbornly high inflation, and the relatively smooth wind-down of the central bank's balance sheet.
While Williams has struck an optimistic tone, expecting GDP growth of 2.0-2.5% in 2024, his speech will be parsed for any shifts in rhetoric.
🇺🇸 GDP q/q — May 30, at 15:30 GMT+3
The second estimate of US GDP growth for the first quarter of 2024 is expected to show the economy expanded at an annualized rate of 1.6%, unchanged from the initial 1.6% reading. While in line with the previous figure, the GDP print will be scrutinized closely given concerns about a potential economic slowdown.
Market participants will not only be watching the US dollar's reaction, but also equity indices like the Dow Jones, Nasdaq, and S&P 500. Just last week, those major indices notched fresh record highs before pulling back amid growth jitters.
🇪🇺 CPI and Core CPI m/m — May 31, at 12:00 GMT+3
The Eurozone inflation reports for May will be closely watched, with economists forecasting a slowdown in both the headline and core CPI numbers monthly. The headline CPI is expected to rise 0.1% m/m, down from 0.6% in April. The core figure, which strips out volatile food and energy, is also projected to moderate.
On an annualized basis, consensus expects the headline CPI reading to dip, providing further evidence that inflation is gradually coming under control after hitting double-digit levels last year.
A downside surprise that shows inflation cooling more quickly could boost the EUR/USD, especially if the data adds to the positive momentum already seen above the 1.0800 support area. The pair is eyeing an upside break of the 1.0880 resistance on the 4-hour charts.
🇺🇸 PCE Price Index m/m — May 31, at 15:30 GMT+3
The US PCE Price Index for May will be the final major economic release this week. Forecasts point to a moderation in the monthly reading to 0.2%, down from the prior month. However, the annual PCE inflation rate is expected to pick up to 3.3% from 3.1% previously.
As the Fed's preferred inflation gauge, the PCE data will be heavily scrutinized for implications on the future monetary policy path. A softer monthly print accompanied by a firming in annual inflation could reinforce calls for the Fed to keep interest rates higher for longer to cool persistent price pressures.
On the other hand, if both the monthly and yearly PCE metrics show a more significant downward trajectory, it could embolden bets for an earlier pivot by the central bank towards rate cuts to support growth.
That's it for this week! 👋
