Week ahead: Will US inflation cool?

The highlight comes at the end of the week with the latest personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of US inflation. Traders are also looking to see if April’s positive momentum in the services PMIs continues into May, whilst UK inflation is also going to be closely watched to see if comes down from the +10.1% heights registered a month ago. Japanese inflation reports are among some of the other important eco data releases on the calendar this week.

Here are the week’s key events:

Monday

Covid winner, reopening loser Zoom reports earnings after it offered a rosy outlook for 2023 at its last quarterly update. Revenue growth will slow this year, with Zoom seeing between $4.435 billion to $4.455 billion in revenue, implying 1.1% growth. For this quarter, adjusted earnings were guided at 96 cents to 98 cents per share on revenue of $1.080 billion to $1.085 billion. On the economic front, traders will watch the latest UK house price data, core machinery orders from Japan, the German Buba report and EZ consumer confidence.

Earnings: Zoom Video (ZM)

Tuesday

It’s PMI day! Flash services and manufacturing PMI data from Australia, France, Germany, the Eurozone, UK and US trickle in throughout the day. For sterling crosses, traders will be watching whether there is any momentum carrying through from the April report, which showed the service sector expanding at a decent clip and inflation pressures reasserting. Similarly, the US flash composite for April rose to an 11-month high with renewed inflation momentum. Will rate hikes slow things down? Economic data has been muddy lately so traders will be keen for more clarity.

Earnings: Intuit (INTU), Palo Alto Networks (PANW)

Wednesday

Traders will want to see if there is anything surprising from the Reserve Bank of New Zealand, after last month stunning markets with a 50bps rate hike, taking the official cash rate to a 14-year high 5.25%. The RBNZ also left the door open to more tightening and most economists it has at least another 25bps up its sleeve. At the start of the European session all eyes are on the UK inflation report after last month’s double-digit figure left the Bank of England with little choice but to raise rates again. Another reading close to 10% would keep the pressure on the central bank to do more. Finally, traders will pay close attention to minutes from the Fed’s May meeting, at which it hiked by 25bps and hinted at a pause/left the door open to a hike in June.

Earnings: XPeng (XPEV), NVIDIA (NVDA), Snowflake (SNOW)

Thursday

Those Fed meeting minutes will drive a lot of the price action overnight. Traders will also watch BoJ core CPI and German final GDP data ahead of the second reading for US GDP in the first quarter. The advance report showed the US economy slowing down with GDP +1.1% vs 2% expected, down from 2.6% in Q4, suggesting perhaps that Fed hikes are taking effect. US pending home sales and natural gas storage figures are also due.

Earnings: Medtronic (MDT), Costco Wholesale (COST)

Friday

Japan’s inflation dynamic is key for the BoJ’s exit from ultra-loose monetary policy, with big implications for the yen. So, Tokyo core CPI, which ticked up to 3.5% at the last count, will be closely watched. Uk retail sales are also in focus but the big one is the latest US PCE inflation report. The personal consumption expenditures price index excluding food and energy, the ‘core’ index that is the Fed’s preferred measure of inflation, rose 0.3% in March from the prior month and 4.6% from a year earlier. Although there are signs of moderating growth in the economy, a persistently tight labour and stubbornly high inflation remain, which could see the Fed push back further against market expectations for a pause in June.