On Wednesday, markets were stunned by the strongest US CPI data print since 1981 and it was a big shock to markets. Even the Fed’s Clarida said he was ‘surprised’. Most analysts were expecting a higher CPI but not this high, and certainly not to be rising this quickly. The reaction midweek was marked: Eurodollar futures slammed lower (implying sooner Fed rate hikes), equities sold off, and the USDJPY soared higher. The USDJPY pair should remain supported. Next week, watch for real yields. If real yields move higher, that creates some downward pressure for gold.

Other key events from the past week

Key events for the coming week

  • AUD: Rate meeting minutes, May 18: The RBA is focusing on labour data right now. Will the minutes reveal any more detail of what they want to see in the labour market before announcing bond tapering? It could be helpful for traders.
  • EUR: PMI data, May 21: European PMI data will reveal the level of optimism that Europe’s purchase managers are feeling. However, expect the main driver of the EURUSD to remain the German Bund and US 10-year yield spread.