RBNZ meeting, GDP from US and Canada as well as inflation data from US and Australia will highlight the week ahead of us. Monday is US holiday, Memorial Day, markets will be closed and liquidity will be lower so caution is advised.
USD
US – Iran negotiations were again a roller coaster ride. President Trump has called off planned strikes on Iran on the request from Gulf states. There were talks that Iran will keep the stockpiles of uranium in the country which was later denied. The deal between countries was expected to be announced, Trump was touting that they are close to the deal. US Secretary of State Rubio stated that Hormuz toll system is not acceptable. Negotiations between countries continue with Pakistani mediators.
Philadelphia Fed President Anna Paulson stated that monetary policy is appropriate, mildly restrictive, and added that markets are right in pricing in rate hikes. She characterized risks to growth and inflation as “super-elevated” stating that if growth moves above potential or inflation risks materialize they will be forced to consider rate hikes. Her remarks are hawkish and may represent a change in Fed towards rate hikes. Nvidia had very strong earnings report showing revenue growth of 80% y/y and a strong forward guidance.
The yield on a 10y Treasury started the week at 4.60%, rose to 4.69% and finished the week at around 4.56%. The yield on 2y Treasury started the week at 4.08%, rose to 4.14% and finished the week at around 4.13%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 43bp. The yield on a 30y Treasury stayed above 5% during the week and finished at 5.07% FedWatchTool sees the probability of a 25bp rate hike at June meeting at around 3% while probability of no change is at around 96%. WTI had another volatile week quickly rising above $100 on market open, reaching high of $108 and then coming down to $100 after news that chances of a deal between warring countries are increasing.
This week we will have second estimate of Q1 GDP as well as PCE inflation data for the month of April.
Important news for USD:
Thursday:
GDP
PCE
EUR
Preliminary May PMI data for the Eurozone showed declines across the sectors. Manufacturing slipped to 51.4 from 52.2 in April, still holding in expansion. Services sector plunged deeper in contraction with a 46.4 print. The report signals drop in new business in services sector as particularly worrying as they have dropped to levels not seen in thirty months. There was a stark divergence between German and French reading with former managing to create small gains in services and composite while later dropped to just 42.4 in services sector. US – Iran war causes huge economic issues for the union as inflation pressures intensify. Composite was dragged down to 47.5 from 48.8 the previous month. Final CPI data for the month of April were unchanged, 3% y/y for headline and 2.2% y/y for core. Services inflation eased to 3% y/y from 3.3% y/y in March. Energy inflation was 10.8% y/y.
GBP
Employment report showed payrolls dropped by 100k in April after March was downwardly revised to show 28k job loses. ILO unemployment rate for March ticked to 5% while average weekly wages rose to 4.1% 3m/y from 3.9% 3m/y in February. Ex bonus category showed wages grow at 3.4% 3m/y pace as expected and down from 3.6% 3m/y the previous month. UK labor data has to be interpreted with a dose of caution due to survey sample issues and data quality emphasized many times by the ONS.
April CPI came in at 2.8% y/y down from 3.3% y/y in March and lower than 3% y/y as expected. Additionally, monthly increase was 0.7% vs 0.9% as expected. Core reading also declined coming in at 2.5% y/y vs 2.6% y/y as expected and down from 3.1% y/y the previous month. Base effects and one-off factors, such as energy cap price reductions as well as electricity and gas prices, caused inflation to come down by more than expected. Services inflation declined to 3.2% y/y from 4.5% y/y in March. We still expect BoE to hike in June but this report lowers the chances. UK government announced that it is lifting sanctions on oil from Russia that is refined in different countries.
Preliminary PMI data for the month of May saw manufacturing at 53.7, same as in April, due stockpiling of inventories while services sunk into contraction with a 47.9 print vs 51.7 as expected. Business activity in services sector plunged as consumers delay their spending due to uncertainties caused by US – Iran war. The report shows one positive is that input prices eased thus putting downward pressure on inflation, but it warns that things could get worse in the coming months for the economy as a whole. Composite was also dragged down into contraction with a 48.5 vs 52.6 the previous month.
AUD
Minutes from the last RBA meeting showed that vote for a rate hike was 8-1 with one member wanting to keep rates unchanged. Members have stated that core inflation is expected to stay higher for a prolonged period and de-anchoring of longer-term inflation expectations as a result of that as the main reason for hiking rates. They expect financial conditions to tighten as a result of a rate hike and they judged loosening of the labor market as necessary due to the current inflationary environment.
Employment report for the month of April showed economy lose 18.6k jobs vs adding 17.5k jobs as was expected. This is the first month of job loses in 2026. The unemployment rate jumped to 4.5% from 4.3% in March, highest since November of 2021, while participation rate ticked down to 66.7% showing very concerning sign that even with fewer workers looking for work the unemployment rate still went up. Both full-time and part-time jobs saw loses with former showing 10.7k jobs loses and latter 7.9k job losses. Such a weak report will move RBA towards pause and hold for longer than previously anticipated.
April economic data from China was disappointing. Industrial production slowed down to 4.1% y/y from 5.7% y/y in March despite very strong exports. Retail sales rose just 0.2% y/y, much weaker than 2% y/y as expected and a drop from 1.7% y/y the previous month making it the weakest growth in over three years. PBoC has left Loan Prime Rates (LPR) unchanged for the twelfth month. 1-year LPR stands at 3% while 5-year LPR is at 3.5%.
This week we will have April inflation data.
Important news for AUD:
Wednesday:
CPI
NZD
Q1 retail sales rose by 0.9% q/q and 4.5% y/y thus beating expectations of a 0.6% q/q growth. Core retail sales also beat expectations rising by 1% q/q vs 0.8% q/q as expected. The consumer is holding up well and that should give more hawkish tones to the RBNZ’s statement at next week’s meeting.
This week we will have RBNZ meeting. No change is expected but language of the statement will be closely watched for any shifts towards more hawkish stance.
Important news for NZD:
Wednesday:
RBNZ Interest Rate Decision
CAD
April inflation report saw headline CPI number rise to 2.8% y/y from 2.4% y/y in March but at much slower pace than 3.1% y/y as expected. Additionally, all three core measures eased with median printing 2.1% y/y, common 2.5% y/y and trim 2% y/y. Energy prices were the main culprit for rise in prices as they rose 19.22% y/y with gasoline prices rising 28.6% y/y and fuel oil and other fuel prices surging 41.3% y/y. With inflation pressures caused by the US – Iran war coming in weaker than expected BoC will be in no hurry to hike.
This week we will have Q1 GDP data.
Important news for CAD:
Friday:
GDP
JPY
Preliminary reading of Q1 GDP surprised to the upside as it showed a 0.5% q/q and 2.1% annualized growth vs 0.4% q/q and 1.7% annualized as expected. Private consumption, making more than half of the GDP, rose 0.3%, better than 0.2% as expected and up from downwardly revised flat reading of Q4 2025. Capital expenditure also rose by 0.3%, beating expectations of 0.2%. These two combined signal strong domestic demand. Net exports contributed 0.3pp to the final reading indicating good demand from abroad as well. Healthy GDP print with all components beating expectations is a welcoming sign, but it refers to the period before war and before supply shock.
Preliminary May PMI data saw slowdowns across the board. Manufacturing eased to still very healthy 54.5 from 55.1 in April. The report shows output index at 54.1 but that seems to be due to the stockpiling as companies look to build inventories and thus insulate themselves from supply shocks caused by the US – Iran war. Services sector dipped further to 50, level not seen since March of last year. First time in over a year that sector was not growing. The report highlights surge in input costs which in turn led to companies passing some of those costs to consumers by lifting selling prices. Employment and business confidence moved up. Composite declined to 51.1 from 52.5 the previous month showing economy that is still growing but at a slower pace.
Yield on 10y JGB continued to climb and crossed 2.81% while yield on a 30y JGB pushed through the 4.15% level. Reports are coming out that BoJ will plan to slow down their QT program at the June meeting in order to support JGB market and reign in surging yields. BoJ owns almost half of all the outstanding JGBs. They are still expected to hike in June so by slowing down or outright pausing QT they will avoid tightening financial conditions on both fronts at once.
Nationwide inflation data for the month of April showed further declines. Headline number ticked down to 1.4% y/y from 1.5% y/y in March while markets were expecting an increase to 1.6% y/y. Ex energy component also printed 1.4% y/y, a big drop from 1.8% y/y the previous month and a much larger decline than 1.7% y/y as expected. Ex fresh food, energy fell to 1.9% y/y from 2.4% y/y in March for the first sub-2% reading since July of 2024. Government subsidies and base effects were the main culprit for such benign inflation readings. BoJ is expected to raise rates in June but this reading could lower their resolve. Also, due to higher energy prices caused by US – Iran war inflation is expected to accelerate in the coming months.
CHF
SNB total sight deposits for the week ending May 15 came in at CHF471.1bn vs CHF467.5bn the previous week. Fourth consecutive week of growth as the data moves out of the range for a new yearly highs indicating more active SNB in injecting Swissy liquidity into the markets. Preliminary Q1 GDP came in at 0.5% q/q vs 0.2% q/q as expected.
