Weekly FX, Bonds Outlook: Spotlight on Fed Decision

The five-day Labor Day holiday that begins on Wednesday in China provides an opportunity to gather new insights into the strength of the country's domestic consumption. However, official data relating to tourism expenditure and box office sales during this period may only be revealed after the holiday ends.

China’s end-April Politburo meeting held by the Chinese Communist Party will also be closely watched amid speculation regarding further stimulus measures being introduced. Analysts at Pantheon Macroeconomics have noted that differing views on monetary policy have emerged recently, sparking debate within domestic policy circles. This discussion centers around a unique policy instrument - treasury bond trading - which is used to enhance liquidity.

Statements from The People’s Bank of China (PBOC) suggest it is unlikely to use this policy tool. Signs of disagreement rather than collaboration among policymakers could increase worries about how effective any forthcoming stimulus measures might be.

In Australia, a relatively busy week for data includes March retail trade figures due on Tuesday. Sales received a boost in February thanks to spending related to Taylor Swift's series of concerts in the country, and analysts believe last month's retail trade will benefit from Easter spending as households typically allocate more funds for food during this time.

Commonwealth Bank of Australia predicts a 0.3% rise in spending in March, mirroring February’s outcome. If accurate, this would result in an improvement of 0.5% over Q1 2024.

Other key statistics for March include credit growth figures alongside building approvals data plus lending indicators and information about Australia’s trade balance situation.

Wednesday promises significant developments for investors attempting to decipher intentions from The Reserve Bank of New Zealand (RBNZ). RBNZ plans releasing its six-monthly Financial Stability Report assessing how well their economy is adapting with higher interest rates currently imposed across NZ markets.

ANZ expects another focus point will concern potential confirmation changes made towards macroprudential policies settings currently maintained by RBNZ.

ANZ also highlighted that the consultation period for proposed debt-to-income limits alongside a slight relaxation in loan-to-value ratio settings ended on March 12. They noted RBNZ suggested it would reveal final decisions halfway through this year, implying their Financial Stability Report could contain these details.

Wednesday will also see the release of Q1 labor-force data. Westpac predicts NZ’s unemployment rate to increase from 4% to 4.2%, with wage growth slowing even further.

South Korea's industrial production figures for March are released on Tuesday, followed by trade data on Wednesday and inflation figures for April on Thursday. These releases present an opportunity to gain insights into the direction of monetary policy in South Korea.

Persistent inflation could strengthen arguments for the central bank extending its current pause in policy changes. Headline inflation in South Korea exceeded 3% for a second month running during March, significantly above their central bank’s target of just 2%.

The Bank of Korea now appears content waiting before implementing any easing measures according to ANZ economist Krystal Tan after recent stronger-than-anticipated GDP growth results across Q1 have resulted in delaying predictions concerning potential interest rate reductions.