Giles Coghlan LLB, Lth, MA
Financial Source
This week's economic calendar is poised to provide several notable trading opportunities. We kick off with a focus on the divergence between the US and Canadian economies, highlighted by recent jobs data that boosted the US dollar while putting pressure on the Canadian dollar, creating a favourable scenario for dollar-CAD trades.
As we enter the Fed's blackout period ahead of their May 1st meeting, the PCE print, the Fed's preferred inflation gauge, emerges as a key event. This indicator will be crucial in shaping market expectations around the Fed's interest rate decisions, particularly after a hot CPI print earlier in April suggested a less likely scenario for rate cuts.
Amid these economic indicators, geopolitical tensions also simmer, with recent developments between Israel and Iran potentially affecting market stability. Should tensions escalate, we could see typical risk-averse reactions such as gains in the Swiss franc, yen, and US dollar, alongside declines in riskier assets like the Aussie and New Zealand dollars. Price action in the Canadian dollar could also be notable due to its ties to oil prices.
On the data front, Australian CPI data is highly anticipated. A significant deviation from expectations could sway the Reserve Bank of Australia's stance on interest rates, impacting the Aussie dollar notably against the New Zealand dollar, where inflation dynamics also play a crucial role.
Furthermore, PMI data from Europe and the UK could influence the euro-pound dynamics, especially if data divergences present clear trading signals.
Wrapping up the week, the US GDP advance and PCE data will be critical. A stronger-than-expected GDP could reinforce the dollar's strength by supporting a 'higher for longer' interest rate scenario. The PCE print on Friday holds the potential to be the week's highlight, with implications for Fed policy expectations moving forward.
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