The week of May 26–30 is shaping up to be crucial for global markets, with a spotlight on U.S. economic indicators and fiscal uncertainty. Investors will closely monitor the Fed minutes and core PCE inflation data for hints on future policy, while concerns over U.S. debt following Moody’s downgrade and a contentious budget bill weigh on the dollar and bond markets—especially with upcoming Treasury auctions.
In the Asia-Pacific region, the RBNZ is expected to cut rates again; Australia and Tokyo will release key CPI reports; and Japan’s inflation outlook may influence BoJ policy. Canada’s GDP will offer insight into the fallout from trade tensions, and OPEC’s production decision could steer oil prices. With rate cuts, inflation trends, and fiscal debates all in play, the week promises to be a pivotal one.
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Key Points to Watch Out For:
- Focus on Fed minutes and PCE inflation — can they give the dollar a boost?
- The RBNZ is likely to cut rates again in response to inflation pressures.
- Also on the agenda: Australia and Tokyo CPI, Canada GDP, and the OPEC+ meeting.
U.S. yields and Treasury auction results are in focus after the House passed the spending bill.
The U.S. Dollar Is Under Pressure from Debt Concerns
With trade tensions easing from the headlines, attention has shifted to the growing U.S. national debt. Congress remains divided over tax and spending reforms, and investors are increasingly concerned about a budget bill that could add up to $4 trillion in new debt.
The situation intensified after Moody’s downgraded the U.S.’s prized AAA credit rating, triggering a sell-off in long-term Treasury bonds and fueling a decline in the dollar, which has already erased 60% of its April–May rally.
After passing by a narrow margin in the House of Representatives, the legislation now moves to the Senate, where a vote is not expected until early June. Markets will watch for any signs that Senate Republicans may push for deeper spending cuts—a move that could calm bond markets, ease yields, and support the dollar.
The timing is delicate, as the Treasury prepares to auction 2-, 5-, and 7-year bonds this week, adding further pressure to already nervous debt markets.
Focus on Core PCE and Consumption
Markets are also awaiting the release on Friday, May 30, of April’s PCE inflation and consumption data, which are critical indicators for the Fed. The core PCE index for March, the Fed’s preferred inflation gauge, fell sharply to 2.6% year-on-year. According to the Cleveland Fed’s Nowcast, the April figure is expected to remain unchanged, while the overall PCE could moderate slightly to 2.2%.
Spending data will be equally important. After a strong 0.7% monthly increase in March, personal consumption is expected to grow by only 0.2% in April, as tariff uncertainty weighs on household spending.
Other key U.S. data this week includes durable goods orders and consumer confidence on Tuesday, second estimates of Q1 GDP and pending home sales on Thursday, May 29, and the Chicago PMI on Friday, May 30.
Meanwhile, investors will scrutinize the minutes of the FOMC meeting on Wednesday, May 28, for clues on interest rate policy. Although policymakers have mostly signaled a wait-and-see stance since the last meeting, any unexpectedly hawkish tone could weigh on stocks but boost the dollar.
Canada’s GDP Will Reveal the Consequences of the Trade War
North of the border, Canada’s first-quarter GDP report, due on Friday, May 30, should reveal the extent to which the trade war with the U.S. has hurt the economy.
Although anticipation of exports likely boosted February figures, March data suggests that shipments to the U.S. declined, despite gains in other markets.
GDP growth likely slowed to 0.2% quarter-on-quarter, from 0.6% in Q4. A worse-than-expected reading could weigh on the Canadian dollar and increase bets on a Bank of Canada rate cut in June, which currently stands at 30%.
The RBNZ Prepares for Its Sixth Rate Cut
The Reserve Bank of New Zealand is expected to cut rates by 25 basis points on Wednesday, May 28—its sixth consecutive cut since August last year. Despite the recent uptick in inflation, persistent labor market weakness and global trade tensions support further easing.
However, the RBNZ may adopt a more cautious tone going forward. An “aggressive cut” could reignite the New Zealand dollar’s recovery against the U.S. dollar, which has stalled since the end of April.
Australian CPI in Focus as RBA Considers Next Steps
In Australia, Wednesday’s inflation data will help shape expectations for the Reserve Bank’s easing cycle. With inflation proving more resilient than expected, investors will watch closely to see if price pressures eased in April. Thursday’s capital expenditure report could also influence the outlook.
Japan’s CPI Could Guide Bank of Japan Policy
Despite first-quarter GDP contraction and ongoing trade tensions, inflation in Japan remains above the Bank of Japan’s 2% target. However, with Japanese government bond yields rising and uncertainty clouding the outlook, policymakers are reluctant to raise interest rates, though they remain committed to normalization.
Tokyo CPI figures on Friday, May 30, will be key, along with industrial production, retail sales, and unemployment data. Earlier in the week, attention will focus on the services PPI on Tuesday, May 27.
Strong CPI data could further strengthen the yen if it reinforces expectations of a rate hike.
Conclusion
It is a relatively quiet week in the eurozone, with Tuesday’s economic confidence survey and Friday’s German CPI data as the main events. In the absence of major geopolitical surprises, markets could open cautiously due to the holidays in the U.S. and U.K. on Monday.
Oil traders will be watching the OPEC+ meeting on Wednesday, May 28, where ministers will discuss production quotas for July. The decision could be delayed until the broader meeting on Sunday, although speculation is growing about a further increase. If the group maintains the current pace of 411,000 barrels per day, oil prices could come under pressure.
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