Important announcement:

nabtrade will be unavailable between 00:00 and 12:45 on Sunday 26th of May for scheduled maintenance.

The US markets shift to T+1 settlement and the FX PDS update both take effect on Tuesday 28th May 2024.

What to watch in the week ahead

The RBA is widely expected to keep rates on hold when it meets on Tuesday, with a tilt back towards a tightening bias on the heels of stubbornly high inflation and low unemployment. Around the globe, the BoE meets on Thursday, China is back from holidays and Canadian Employment data is released on Friday.

Tapas Strickland & Taylor Nugent | NAB Markets Research

What to Watch - Week of 6 May 2024

Past Week

  • Speculation Japan intervened twice this week to support the Yen. To the extent Yen weakness was putting pressure on Chinese authorities to depreciate the Yuan, a firmer Yen should help stabilise the AUD
  • Markets rally in the glow of the FOMC where Powell said it was “unlikely” the next move would be a hike. Instead, policy focus is on how long to keep policy restrictive before then cutting rates
  • Diverging policy paths priced for the ECB and Fed. Markets broadly fully priced for a June ECB rate cut, in contrast the US Fed is only priced to cut rates from November, while for the RBA it is not until September 2025!

Comment

  • Government spending is one of the reasons activity has surprised globally despite substantial monetary tightening. In some countries, that is occurring when the output gap is still positive – US and NZ
  • A key question for markets should be whether bloated government spending will be reined in. We are doubtful – no politician ever got fired for spending too much
  • Political discourse appears to have shifted post-pandemic to a greater role of government. With important elections in 2024-early 2025 (US Nov 2024; UK by Jan 2025; AUS by May 2025) it could be large deficits remain

Week ahead

  • The RBA (Tuesday) is expected to be on hold. Low unemployment and hot inflation should see a tilt back towards a tightening bias after what many interpreted was a neutral bias at the March meeting
  • Soft activity growth and a tighter for longer forecast assumption are some offset for the RBA’s inflation forecasts, but the reluctant hikers are once again challenged by the data. Also note ANZ and WBC report this week.
  • The BoE (Thursday) is seen on hold. Markets though almost fully price a cut by August. Note it is a Bank Holiday on Monday. Elsewhere in Europe the Riksbank (Wednesday) meets with markets pricing 47% chance of a cut
  • US data calendar is light, with UMich Sentiment (Friday). There are, a few Fed speakers. with the Fed’s Williams (Monday) the most notable, and the Senior Loan Officers Survey (Monday).
  • China back from holidays (as is Japan). Caixin Services PMI (Monday) and Trade (Thursday), while Xi visits Europe – trade/investment relations
  • Canadian Employment (Friday) is the final labour market update ahead of the 5 June meeting, where a cut is two-thirds priced.

View the full report here

Also in the What to Watch

This document has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). Any advice contained in this document has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this document, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it.

Please Click Here to view our disclaimer and terms of use. Please Click Here to view our NAB Financial Services Guide.

All prices and analysis at 3 May 2024.  This information has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB").

The content is distributed by WealthHub Securities Limited (WSL) (ABN 83 089 718 249)(AFSL No. 230704). WSL is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited (ABN 12 004 044 937)(AFSL No. 230686) (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer.  This material is intended to provide general advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.  Past performance is not a reliable indicator of future performance.  Any comments, suggestions or views presented do not reflect the views of WSL and/or NAB.  Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice including any third party sourced data (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable. For more information, please click here.


About the Author
NAB Markets Research

Our markets team is keeping clients informed with award-winning in-depth analysis on the Australian economy, foreign currency, fixed income, credit and commodities markets.