The week ahead will see a treasure-trove of top tier economic releases both locally and abroad to guide the way. Locally, the consumer price index will take centre stage on Tuesday which is expected to see inflation growth of 0.7 percent in Q1 representing annual growth of 2.2 percent.
The primary focus will be the RBA's preferred measure of underlying inflation which is expected to show annual trimmed mean growth of 2.4 percent and weighted median growth of 2.3 percent. Both measures are predicted to rise 0.6 percent on month.
Tuesday's inflation data presents significant event risk for the Australian dollar given recent comment from the RBA suggesting the need to evaluate forthcoming CPI to ascertain the viability of interest rate cuts.
With an all but certain rate cut in May already baked into the market, we anticipate limited immediate downside for the Australian dollar with any deviation to the upside of estimates likely create upside opportunity for the Aussie as market participants seek to recalibrate the chance of multiple rate cuts. The primary barometer for the local unit today will be the release of PPI and HSBC flash Chinese manufacturing PMI.
A string of top tier risk events in the U.S paths the way for a potentially critical shift in greenback demand with stimulus expectations a primary directive.
The FOMC rate decision will the primary focus mid week on the U.S docket with the Fed also releasing growth and interest rate projections followed by a press conference by Fed Chairman Ben Bernanke.
Investors will also be watching the release of 1Q GDP on Friday which is expected to see annual growth of 2.5 percent from a previous 3 percent. Core personal expenditure and University of Michigan confidence data will wrap up a huge week in terms of event risk.
Across the Atlantic both German and Euro-zone manufacturing PMI's will be a primary focus with appetite for peripheral debt tested once again with an Italian debt Auction. German CPI on Thursday will be a critical for rates enthusiasts with easing inflationary pressures likely to help the case for a near-term Euro-zone rate cut. All eyes will also be on Japan's central bank on Friday with speculation rife the Bank of Japan will take further easing measures.
AUDUSD - 1.0373
EURUSD - 1.3190
GBPUSD - 1.6130
USDJPY - 81.580
NZDUSD - 0.8168
USDCHF - 0.9100
USDCAD - 0.9920