Market analysts are looking ahead to three key events next week, which are expected to have a significant impact on the financial markets. These events include the release of the US Consumer Price Index (CPI), the Bank of Canada (BoC) rate decision, and the Federal Open Market Committee (FOMC) minutes.
First, the US CPI report is slated for release next week. Core prices likely cooled off modestly in March, with the index predicted to rise by a strong 0.4% month-on-month. This is due to the expectation that recent relief from goods deflation will turn into inflation this month. Shelter prices are expected to be the key wildcard in the report, while slower gas prices and softer food-price gains could dent non-core inflation. Analysts at TD Securities (TDS) forecast the year-on-year figures for total and core prices at 5.1% and 5.6%, respectively.
Next, the BoC rate decision is also anticipated next week. Analysts expect the BoC to hold at 4.50% in what should be an easy decision, given that recent banking stress has taken some pressure off after the rebound in Q1 GDP. The more interesting aspect of the decision will be how the Bank incorporates banking stress into the April Monetary Policy Report (MPR). As the BoC tries to balance stronger growth and a more ominous outlook, the result is likely to be a mixed tone that supports the conditional pause.
Finally, the FOMC minutes from the March meeting are set to be released next week. The rate hike announced in March was widely seen as dovish, with the distribution of the dot plot for 2023 pointing toward a more hawkish sentiment across the committee. However, considering that banking stress now seems to be somewhat contained, the minutes for this meeting might emphasize this hawkish sentiment due to the continued elevated inflationary pressures.
The outcomes of these events have the potential to generate significant market volatility, particularly if they deviate significantly from expectations. Investors and traders should closely monitor these developments and consider their potential implications for various asset classes, including equities, currencies, and fixed income securities.
In summary, the US CPI report, the BoC rate decision, and the FOMC minutes are the top three market-moving events to watch for next week. Their outcomes could have a significant impact on the financial markets, particularly if they deviate from expectations. Investors should keep a close eye on these events, as well as any related economic data releases, in order to make informed decisions in these potentially volatile markets.