Investing.com - Global financial markets will focus on this week's U.S. consumer price data, which should give clearer signs on the pace of inflation and fresh hints on the frequency of Federal Reserve rate hikes through the end of the year.
Market players will also pay close attention to comments from several Fed speakers this week for insights into the outlook for monetary policy in the months ahead.
The Fed is currently signaling two more rate hikes this year, but the inflation figures, if strong enough, could just confirm growing expectations among market players that it will squeeze in a third.
There are also about 40 S&P 500 companies reporting earnings in the week ahead on Wall Street, as the earnings season starts to wind down.
Meanwhile, in Europe, most of the focus will be on the Bank of England policy meeting, which looks set to keep interest rates on hold due to a recent spate of disappointing economic data, capping a sharp swing in the outlook for the British central bank.
Elsewhere, market participants will also be looking ahead to monthly trade figures out of China, though it is likely still too early to see any impact from the recent trade dispute with the U.S.
The market will also have to navigate other things that worry it in the coming week, such as ongoing trade war talk between the U.S. and China as well as the Trump administration's decision on whether to pull out of the 2015 international nuclear deal and reinstate sanctions against Iran.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S. Inflation Data
The Commerce Department will publish April inflation figures at 8:30AM ET (1230GMT) Thursday.
Investors will study the numbers to get a feel for the U.S. inflation trend and any impact the data could have on the Federal Reserve's monetary policy.
Market analysts expect consumer prices to post a gain of 0.3%, snapping back from March's 0.1% decline, while core inflation is forecast to inch up 0.2%, the same as its rise a month earlier.
On a yearly base, core CPI is projected to climb 2.2%, a tad faster than the 2.1%-gain recorded in the preceding month.
Core prices are viewed by the Fed as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories.
Rising inflation would be a catalyst to push the U.S. central bank toward raising interest rates at a faster pace than currently expected.
Besides the inflation data, this week's calendar also features reports on producer prices, weekly jobless claims as well as a preliminary reading on Michigan consumer sentiment.
Data released Friday showed that while U.S. job growth fell short of expectations in April and wages barely rose, the jobless rate fell to a near 18-year low, supporting the case for the Fed to stay on its gradual rate-hiking path.
2. Fed Speakers
About a dozen Fed speeches will get market attention in the week ahead, as traders watch for clues on the pace of future rate hikes this year.
Topping the agenda will be remarks from Fed Chair Jerome Powell, who will appear at a conference hosted jointly by the Swiss National Bank and International Monetary Fund, in Zurich. He is due to deliver a speech titled "Monetary Policy Influences on Global Financial Conditions and International Capital Flows".
Speeches from Fed Governor Randal Quarles, Atlanta Fed boss Raphael Bostic, Richmond Fed President Thomas Barkin, Dallas Fed chief Robert Kaplan, Chicago Fed President Charles Evans, and St. Louis Fed President James Bullard will also be on the agenda this week.
The Fed kept interest rates unchanged following its policy meeting last week, a move that was widely expected, and noted that inflation was starting to inch higher, leaving it on track to raise borrowing costs in June.
The U.S. central bank currently forecasts two more rate hikes in 2018, although market expectations of a third move higher before the end of the year has been gaining momentum in recent weeks amid strengthening inflation prospects.
Investors will have their eyes on the dollar and on Treasury yields after the greenback leaped to its highest levels this year against a basket of currencies on Friday, while the 10-year yield held within sight of the 3%-level.
3. Earnings Season Starts To Wind Down
About 40 S&P 500 companies are due to report financial results this week, in what will be the last big wave of the first-quarter earnings season.
Tyson Foods (NYSE:TSN), Hertz Global (NYSE:HTZ), Cognizant Technology (NASDAQ:CTSH) and AMC Entertainment (NYSE:AMC) are on the agenda for Monday.
Results from Disney (NYSE:DIS), Marriott (NASDAQ:MAR), Valeant Pharmaceuticals (NYSE:VRX), Electronic Arts (NASDAQ:EA), Wendy’s (NASDAQ:WEN), Dean Foods (NYSE:DF), Etsy (NASDAQ:ETSY), Jd.Com (NASDAQ:JD), and Microchip Technology (NASDAQ:MCHP) will capture the market's attention on Tuesday.
Groupon (NASDAQ:GRPN), Roku (NASDAQ:ROKU), Weibo (NASDAQ:WB), SINA (NASDAQ:SINA), Office Depot (NASDAQ:ODP), and Anheuser Busch Inbev (NYSE:BUD) report results on Wednesday.
Thursday sees NVIDIA (NASDAQ:NVDA), News Corp (NASDAQ:NWSA)., Symantec (NASDAQ:SYMC), Dropbox (NASDAQ:DBX), and Yelp (NYSE:YELP) post earnings.
Finally, Thomson Reuters (NYSE:TRI) are among the few reporting on Friday.
U.S. stocks rallied on Friday, as shares of Apple (NASDAQ:AAPL) hit an all-time peak to lead the technology sector higher.
The positive numbers on Friday, however, were not enough to offset weekly losses for the Dow and S&P 500, each down roughly 0.2%.
4. Bank of England Policy Announcement
The Bank of England (BoE) will announce its rate decision at 1200GMT (8:00AM ET) on Thursday, with market expectations now overwhelmingly in favor of interest rates being held at the current 0.5% rate.
Interest rate bets have swung around sharply from early-April when investors priced a 90% chance of the BoE raising rates by 25 basis points.
But a spate of weak economic data is almost certain to stay the BoE’s hand, which might now struggle to convince investors that it will raise borrowing costs at all this year.
BoE Governor Mark Carney will hold a press conference shortly after the announcement, and investors will monitor his language for signals on what the appetite is for hikes further out in 2018.
The British pound, which has lost more than 6% against the dollar in the last two weeks, fell to its lowest level since January on Friday. More dovish remarks from the BoE could send the currency even lower.
5. China Trade Figures
China is to release April trade figures on Tuesday morning.
The report is expected to show that the country’s trade surplus rose to $27.5 billion.
Exports are forecast to have climbed 6.3% from a year earlier, while imports are expected to rise 16.0%.
Trade figures released last month showed that China's exports unexpectedly fell in March, resulting in a rare trade deficit. However, most analysts chalked it up to seasonal factors and said it was too early to call a trend.
The Asian nation will also publish reports on April consumer and producer price inflation on Thursday. The data is expected to show that consumer prices rose 1.9% last month, while producer prices are forecast to increase by 3.4%.
Trade talks between the United States and China will also keep investors on their toes this week.
The U.S. trade delegation's visit to Beijing ended Friday with little obvious progress in resolving a trade dispute between the two economic powerhouses.
Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/