We go into a new week with stock markets hitting fresh record highs amid still elevated energy prices. Investors are expecting the Strait of Hormuz to get opened soon because a deal with Iran is ‘largely negotiated’, as President Trump said over the weekend. Crude oil supplies will take some time to get back to any sense of normality, but markets are also celebrating strong corporate earnings, plus a huge and historic IPO pipeline that includes SpaceX and Anthropic in the coming weeks. Nvidia’s results cemented impressive tech numbers this season with first quarter revenues increasing 85% year-over-year.  It seems the risk rally can continue, with any inflation problem largely seen as an issue for rates markets and not as yet a global growth issue.

Fixed income markets have been in focus with Treasury yields hitting multi-year highs in recent weeks. But bonds have cheapened lately, partly because markets have pivoted toward pricing Fed rate hikes. A little over a quarter point of rate hikes is priced into year-end and early next year compared to early March when money markets were leaning toward pricing 50 to 75bps of rate cuts. It would appear that there is a very high bar to the FOMC pivoting toward hikes as a consensus call with a new incoming Chair in Kevin Warsh. That would be an about-face to match any seen in central bank history and could also prompt renewed threats to Fed independence. The Fed is already restrictive by contrast to many other global central banks like the BoC, ECB, and BoJ, as the policy rate is above most reasonable estimates of neutral.

The dollar has paused for some breathe after its break higher a couple of weeks ago. Price action looks like bullish consolidation before a move higher, but resistance sits around 99.44 and the late April high. Aside from the above, there is also the small matter of rising stagflation concerns, especially on any sudden escalation in the Middle East. Hot, fresh US inflation data this week could support greenback bulls, with one-month G7 implied FX volatility currently near the lows of the year. That means markets are not priced for any dramatic news; the contrarian in us warns that this can be upended soon enough.

In Brief: Major Data Releases of the Week

Wednesday, 27 May 2026

Australia CPI: April CPI is forecast to remain elevated at 4.4% y/y due to travel and clothing, though this should be offset by falling transport costs. Any signs of second round effects will be keenly watched by the RBA. The bank recently highlighted the risk of de-anchored inflation expectations. Hotter than expected figures, with the headline holding near or above about 4.5%, would reinforce the risk of further tightening. Markets previously priced an August RBA hike at about 75%, although a pause is now the base case following recent soft Australian jobs data.

RBNZ Meeting: The RBNZ is expected to leave the OCR steady at 2.25% for a third straight meeting. Recent data has been mixed with annual inflation above the 1-3% target range at 3.1%, but unemployment unexpectedly easing to 5.3%. Some officials may see the need to remove monetary stimulus at this meeting amid a challenging economic outlook.  

Thursday, 28 May 2026

US Core PCE: The Fed’s favoured inflation gauge is predicted to rise 0.3% m/m and 3.8% y/y. The annual print would be the hottest since 2022. The April Fed meeting highlighted that a majority would support rate hikes if inflation remains above target. There’s currently near a 70% chance of a 25bps move by year-end.

Friday, 29 May 2026

Tokyo CPI: This data is the forerunner to nationwide inflation. CPI is predicted to rise modestly as underlying price pressures continue to build, amid sticky services inflation. Hot data would likely cement BoJ rate hike expectations at next month’s meeting. But a softer print would support a more cautious stance and likely weigh on JPY. Wage pass-through remains the key swing factor for policymakers at present.