Weekly data: inflation around the world

This article was submitted by Michael Stark, market analyst at Exness.

Stock markets have generally retreated so far this week as participants remain worried about runaway inflation in many countries and weaker Chinese data. This preview of weekly data looks at GBPZAR and AUDCAD.

Last week the Banco de Mexico raised its benchmark rate to 7%, a two-step hike, as expected. Participants in markets also started to expect even more aggressive tightening from the Fed next month, with CME FedWatch Tool showing a 20% chance of a three-step hike. The most important central bank meeting this week is the South African Reserve Bank.

The key regular data coming up are inflation from Italy, the UK, South Africa, the eurozone, Canada and Japan. Last month’s American CPI declined slightly to 8.3%, a possible indication that inflation might have peaked in the USA, so traders will focus closely on equivalent releases elsewhere this week to analyse whether this might be the case in other major economies also, however unlikely that seems for the UK. Meanwhile Australian jobs are in focus on Thursday morning.

Pound-rand, daily

Despite large losses since the middle of April against the dollar and some other majors, the pound has generally held its strength against the rand so far this quarter. The Bank of England’s relative dovishness considering the circumstances with inflation have brought negativity to the pound, while expectations are also growing that the British economy will enter recession later this year.

South Africa’s economic outlook still appears worse, though, between flooding, ongoing blackouts and Covid’s resurgence in some areas. However, inflation in South Africa has advanced much more slowly than in the UK and various other major, advanced economies.

There seems to be limited demand for now to push above the main resistance, the 100 SMA, but a breakout above here could see a test of the 200 SMA and the 61.8% area of the weekly Fibonacci fan. ATR’s large rise since the end of March, from about R0.2 to nearly R0.5, would traditionally indicate an uptrend, but whether this might become clear on the chart depends on the reaction to this week’s data.

Pound-rand is likely to be very active this week given the high volume of important economic releases. Tomorrow morning from 6:00 GMT might be the most volatile time given that both British and South African annual inflation are due within two hours of each other. At the time of writing, it seems likely that the SARB will announce a two-step hike to 4.75% on Thursday.

Key data this week

Bold indicates the most important releases for this symbol.

Wednesday 18 May

  • 6:00 GMT: British annual inflation (April) – consensus 9.1%, previous 7%
  • 6:00 GMT: British annual core inflation (April) – consensus 6.2%, previous 5.7%
  • 6:00 GMT: British monthly inflation (April) – consensus 2.6%, previous 1.1%
  • 6:00 GMT: British monthly core inflation (April) – consensus 0.8%, previous 0.9%
  • 8:00 GMT: South African annual inflation (April) – consensus 6%, previous 5.9%
  • 8:00 GMT: South African annual core inflation (April) – consensus 3.9%, previous 3.8%
  • 8:00 GMT: South African monthly inflation (April) – consensus 0.9%, previous 1%
  • 11:00 GMT: South African retail sales (March) – consensus 1%, previous negative 0.5%

Thursday 19 May

  • from 13:00 GMT: decision and press conference of the South African Reserve Bank

Friday 20 May

  • 6:00 GMT: British retail sales (April) – consensus negative 0.2%, previous negative 1.4%

Australian dollar-Canadian dollar, daily

Commodity currencies have generally taken a hit from recent expectations of weaker growth this year, particularly in China. However, the Aussie dollar has done worse than the loonie primarily because of the latter’s correlation with crude oil and the Bank of Canada’s apparent commitment to energetic tightening of monetary policy.

March’s Canadian unemployment at 5.3% was the lowest in history since equivalent records began in 1976. Although markets are pricing in at least one hike each month by the Reserve Bank of Australia this year, inflation in Australia is unlikely to return to the target range until 2024 at the earliest.

The Aussie dollar seems to have landed on support for now around the 61.8% weekly Fibonacci retracement area, which is also the area of 30 January’s low. Buying volume has increased significantly within strong oversold from the slow stochastic and Bollinger Bands.

There doesn’t seem to be another key support until around 83.5 Canadian cents, but ongoing momentum lower in this situation is unfavourable. New sellers from here would traditionally want to wait for a moderate retracement upward before entering. This might be triggered by stronger Australian jobs or lower than expected Canadian inflation this week.

Key data this week

Bold indicates the most important releases for this symbol.

Wednesday 18 May

  • 12:30 GMT: Canadian annual inflation (April) – consensus 6.7%, previous 6.7%
  • 12:30 GMT: Canadian annual core inflation (April) – consensus 5.4%, previous 5.5%
  • 12:30 GMT: Canadian monthly inflation (April) – consensus 0.5%, previous 1.4%
  • 12:30 GMT: Canadian monthly core inflation (April) – consensus 0.4%, previous 1%

Thursday 19 May

  • 1:30 GMT: Australian unemployment rate (April) – consensus 3.9%, previous 4%
  • 1:30 GMT: Australian employment change (April) – consensus 30,000, previous 17,900

Disclaimer: opinions are personal to the author and do not reflect the opinions of Exness or LeapRate.

Read Also: