RBC Capital Markets

There are rate decisions in New Zealand (22:00 ET on May 25 / 10:00 HKT on May 26), Indonesia (03:20 ET/15:20 HKT) and Hungary (08:00 ET), with all expected to see rates unchanged. Data releases include the IFO survey in Germany, the flash mfg. sales report in Canada, budget data in the UK, and new home sales/Conf. board consumer confidence/Richmond Fed mfg index in the US. Canada’s flash mfg. sales report is expected to show a dip in April (prior +9.0%m/m), weighed down by another sharp pullback in auto production due to the ongoing global semi-conductor shortage.

There will be central bank speakers from the Fed (Evans, Barkin, Quarles), Riksbank (Ingves), ECB (Villeroy, Lane), and BOE (Tenreyro). Ingves is likely to reinforce the Riksbank’s dovish message despite booming house prices.

NZD: The RBNZ meets tonight (universally expected to leave rates on hold); the more interesting question is what it signals for the future. The tone is likely to be cautious in line with other G10 central banks, as ongoing border restrictions continue to dampen activity. They will have updated growth and inflation forecasts which will be weaker than assumed in Feb (though with a tighter labour market and surging ToT).

Some have raised the possibility of a further taper as expected bond supply declines. The kneejerk FX reaction as always is likely to be less LSAP -> NZD positive, but we’d expect it to fade unless there is an accompanying signal on the question that interests us more – when will rates start going up?

Markets and analysts are pricing a very low probability of a hike in the next 12m and while the RBNZ has tried to stay dovish, that does create some upside NZD risk if they start shifting stance. Some members of the NZIER’s shadow MPC think an OCR hike is appropriate in the coming year.

IDR: Bank Indonesia's policy meeting today (08.20 BST) is widely expected to see rates on hold.BIhas been keen to support the rupiah, and this motive will remain in play

today. The external trade and PMI figures are indicating a strengthening recovery, with another Covid-19 upsurge remaining the key threat. Our Asia strategist still argues USD/IDR should be lower given the positive global risk sentiment, and the currency's carry appeal.

HUF: In Hungary, given the hawkish comments from Deputy Governor Virag last week that caused the market to raise rate hike expectations, the focus will be on any further hints about the NBH’s tightening plans.With a decent amount of hikes priced in (almost ~60bps this year), the hurdle for a hawkish message has increased.

Citi

Better risk appetite at the start of the week continued overnight, with most Asia equity indices trading in the green. CSI 300 has rallied 2.4% at time of print, lending to downward pressure in USDCNH though the key support range at 6.4009-6.4118 is holding at this time.

There was similar price action seen across the spectrum although our sense is that FX is still somewhat of a side show compared to other asset classes. Dovish Fedspeak on Monday aided sentiment, and we note that we have more central bankers on the docket today.

EURUSD will see Germany IFO data which is expected to be buoyant in both headline and expectations, though last week’s Markit PMI suggested that supply side pressures could weigh. Central banks for IDR, HUF, NGN are not expected to change rates today, though there may be some hawkish tones for HUF. Note another personnel change at the TRY central bank. Otherwise, we see limited event risk in the RBNZ tonight.

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