The Week Ahead: US inflation data key to Fed outlook and bond markets

Earnings season is largely in the rearview mirror while the situation between the US and Iran remains front and centre as markets navigate the phase. 

US GDP data, the April PCE inflation report, Eurozone inflation readings and a Reserve Bank of New Zealand interest rate decision make up the key events in a holiday-shortened week for traders.

Here’s the key events to watch over the next week.

Monday, 25 May

The trading week kicks off with the Spring Bank Holiday in Britain and the US Memorial Day holiday, with markets closed. Hong Kong and South Korea also have market holidays. German import price data is the only economic event of note.

Tuesday, 26 May

Another quiet day for economic day – US consumer confidence, the Shiller house price index, Japan core CPI inflation and the UK’s BRC shop price index offering a smattering of data points.

Kingfisher reports Q1 sales with investors looking to see what the impact of the Iran war is having on demand in DIY and the building trade, as well as any guide on price pressures.

Wednesday, 27 May

The Reserve Bank of New Zealand is expected to leave rates on hold at 2.25%, with a slim chance of a rate hike in Q3 now seen. The main economic events include the Australia CPI inflation and Westpac leading index, along with data on China industrial profits. 

Dow component Salesforce reports earnings after a difficult few months on concerns that AI will replace software, with shares down –30% YTD. Marvell Technology, which has been one of the most popular stocks this year among retail investors, reports earnings, Shares have notched 15 record closes this year.

Thursday, 28 May

The major focus is on a couple of major US economic data reports. The second reading for Q1 GDP is released, with the initial read indicating real GDP rose 2.0% in the first quarter. This comes alongside a key inflation report that comes hot on the heels of those CPI and PPI readings which set bonds alight. The April US personal income and spending report including the PCE index — the Fed’s preferred inflation gauge — will offer a crucial read for policymakers at the Fed as it debates shifting from its easing bias to one of tightening. Data on new home sales, jobless claims and durable goods orders will also be released.

There are also Eurozone economic confidence and consumer confidence surveys ahead of the US releases. The Bank of Korea is expected to hold rates as new Governor Hyun Song Shin holds his first policy board meeting. The Reykjavik Economic Conference is held in Iceland, featuring central bankers including New York Fed President John Williams, Band of England Governor Andrew Bailey, and SNB President Martin
Schlegel. The ECB will publish the account of its April policy meeting, potentially giving a signal on when it expects to hike rates.

On Wall Street Dell reports earnings, while SSE and Johnson Matthey deliver their full-year results in London.

Friday, 29 May

The week rounds out with a deluge of inflation readings that will be important for global bond markets. Highlights are Japan’s Tokyo core CPI and German preliminary CPI inflation reports as both the Bank of Japan and European Central Bank are seen next moving to hike rates. US Treasury Secretary Scott Bessent speaks at the Reagan National Economic Forum in California, while the IISS Shangri-La Dialogue begins in Singapore, with US Defence Secretary Pete Hegseth expected to attend.