RBA Rate Decision in Focus as Policy Caution Persists; UK Data to Shape BoE Outlook

The Week Ahead: Week of 19th May 2025 (GMT+3)

Weekly Market Preview
The Reserve Bank of Australia’s interest rate decision headlines this week’s economic calendar, with markets broadly expecting the central bank to hold the cash rate steady. Recent economic data have painted a relatively stable picture, while ongoing global trade tensions continue to justify a cautious policy approach by the RBA.

Across the globe, attention also turns to the UK, where inflation and growth figures are offering fresh insights into the health of the British economy. These indicators are likely to weigh heavily on the Bank of England’s policy deliberations, with potential implications for the Pound Sterling’s trajectory against major counterparts. Market participants will be watching for any hawkish or dovish pivots as central banks navigate diverging economic landscapes.

Key Events to Watch:

Monday, May 19th – 12:00
EUR CPI (YoY) (Apr)
Previous: 2.2% | Forecast: 2.2 | Actual: N/A
The Eurozone Consumer Price Index (CPI) registered a year-on-year increase of 2.2%, a level deemed optimal for the European Central Bank (ECB) to maintain its monetary policy stance. Following the ECB’s 25-basis-point interest rate cut in April, market consensus anticipates the April CPI (YoY) to remain consistent with the prior reading. Should the CPI align with expectations, this could reinforce market confidence that the ECB will hold interest rates steady at its June monetary policy meeting, supporting the euro’s stability against major currencies.

Tuesday, May 20 – 07:30
RBA Interest Rate Decision (May)
Previous: 4.1% | Forecast: N/A | Actual: N/A
The Reserve Bank of Australia (RBA) maintained its cash rate at 4.1% in April, reflecting caution amid uncertainties in global trade driven by concerns over President Trump’s expansive tariff policies. Recent Australian economic indicators, particularly robust employment data exceeding market expectations, suggest a strong likelihood that the RBA will opt to keep the interest rate unchanged at its upcoming meeting, supporting economic stability in the face of external risks.

Wednesday, May 21 – 09:00
U.K. CPI (YoY) (Apr)
Previous: 2.6% | Forecast: N/A | Actual: N/A
UK inflation is showing signs of moderating following a pickup in the first quarter of 2025, with the Consumer Price Index (CPI) reaching 3% in February. In response to economic contraction, exacerbated by disruptions from the U.S.’s expansive tariff policies, the Bank of England (BoE) reduced interest rates by 25 basis points in May. Should the upcoming CPI reading align closely with the previous figure, signaling that inflationary pressures are stabilizing at a manageable level, this could bolster confidence in the Pound Sterling and support its recovery against major currencies.

Thursday, May 22– 11:30
Composite PMI  (May)
Previous: 48.5 | Forecast: N/A | Actual: N/A
The UK Composite Purchasing Managers’ Index (PMI) is expected to indicate a slowdown, reflecting the UK economy’s struggle to maintain momentum amid headwinds from trade concerns triggered by the U.S.’s expansive tariff policies. Declining business confidence, as evidenced by recent GDP data, is likely to further weigh on the Composite PMI reading, signaling heightened economic uncertainty and weakened private sector activity

Thursday, May 22 – 11:30
Manufacturing PMI (May)
Previous: 45.5 | Forecast: N/A | Actual: N/A
The UK job market is encountering challenges, with notable job losses in the manufacturing sector, which are likely to be reflected in the upcoming UK Manufacturing Purchasing Managers’ Index (PMI) reading. A PMI reading below 45 would provide further evidence of contraction in the UK’s manufacturing sector, underscoring the economic pressures impacting industrial activity.

Thursday, May 22 – 15:30
U.S. Initial Jobless Claims
Previous: 229k | Forecast: N/A | Actual: N/A
The U.S. initial jobless claims have remained stable, hovering around 229,000 in recent weeks. Strong U.S. employment data, including a better-than-expected Non-Farm Payrolls (NFP) report and declining continuing jobless claims, signal a robust labor market. Should the upcoming initial jobless claims figure come in below the previous reading, it could further strengthen the U.S. dollar against its peers, reinforcing confidence in the economy’s resilience.

Thursday, May 22 – 16:45
U.S. Manufacturing PMI  (May)
Previous: 50.2 | Forecast: N/A | Actual: N/A
The U.S. manufacturing sector is anticipated to exhibit mild contraction, driven by declining imports and exports amid uncertainties surrounding U.S. trade policy. The Manufacturing Purchasing Managers’ Index (PMI) is struggling to remain above the 50 threshold, which separates expansion from contraction. A PMI reading below 50 would signal a contraction in the U.S. manufacturing sector, highlighting the challenges posed by ongoing trade policy concerns.

Friday, 23 May — 09:00

UK Retail Sales (MoM)(Apr)

Previous: 0.4% | Forecast: N/A | Actual: N/A
UK Retail Sales are expected to show modest improvement, driven by increased consumer spending during the Easter shopping period. With retail sales maintaining positive growth rates, this upward trend could further strengthen the Pound Sterling against major currencies, reflecting improved consumer confidence and economic activity.

Friday, 23 May — 09:00

German GDP (QoQ)(Q1)

Previous: -0.2% | Forecast: 0.2% | Actual: N/A

Germany’s GDP is anticipated to shift from a negative reading to positive growth in the current quarter. As the Eurozone’s largest economy, Germany faced challenges in the previous quarter, but recent improvements in the broader Eurozone GDP figures suggest a potential recovery. This expected upturn in German GDP could signal stronger economic momentum, supporting the Eurozone’s overall growth and potentially bolstering the euro’s strength.