UBS - "In the week ahead, US April core PCE inflation will show whether the Federal Reserve needs to consider earlier tightening. In contrast, Japan's national CPI release will test the Bank of Japan's resolve to keep its current pace of quantitative easing unchanged and Eurozone M3 money supply is likely to show credit growth remaining too subdued to revive inflation quickly in the Eurozone. The dollar is set to keep gaining as the Federal Reserve tapers its balance sheet expansion while the Bank of Japan and European Central Bank consider further easing.
This week's key points for currencies are:
- US core PCE inflation will become increasingly important
- EU elections to keep euro pressured ahead of June ECB date
- Japan CPI key test for BoJ in the week ahead
- stay cautious Cable with much good news already priced in
- quarterly capex release to signal no RBA hikes this year
- kiwi a sell on rallies as risk RBNZ pauses after June hike
- Canadian retail sales, inflation data will keep BoC dovish"
Mansoor Mohi-uddin Managing Director Head, Foreign Exchange Strategy UBS Macro Research