Central Bank Crossfire: Fed and BoE Set the Tone

The Week Ahead: Week of 5th April 2025 (GMT+3)

Weekly Market Preview
Monetary policy takes center stage this week as the Federal Reserve and Bank of England prepare pivotal rate decisions, with markets on edge amid sticky inflation and cooling services activity. The Fed is widely expected to keep rates steady at 4.50% on Wednesday, but investors will dissect the policy statement and Chair Powell’s press briefing for any dovish inflection, particularly after recent softening in ISM and PMI data. 

Across the Atlantic, the Bank of England convenes Thursday, where a 25bps hike is priced in, potentially lifting the base rate to 4.50%. However, with UK inflation still elevated and wage growth persistent, forward guidance will be key for sterling volatility. U.S. jobless claims and Treasury auctions will further shape rate expectations heading into May. Meanwhile, liquidity could be sporadic early in the week due to holidays in China, Japan, South Korea, and the UK, possibly exaggerating market reactions to key macro prints. Crude markets also remain in focus, with Wednesday’s inventory data offering fresh clues on demand as energy volatility persists.

Key Events to Watch:

Monday, May 5 – 16:45

S&P Global Services PMI (Apr)

Previous: 54.4 | Forecast: 51.4 | Actual: N/A

Markets are awaiting confirmation of a slowdown in the U.S. services sector, with the forecast suggesting a notable deceleration. A sharp drop toward or below 51 could signal weakening momentum and fuel dovish speculation ahead of the Fed meeting.

Monday, May 5 – 17:00
ISM Non-Manufacturing PMI (Apr)
Previous: 50.8 | Forecast: 50.6 | Actual: N/A

The U.S. services sector remains under pressure, with March’s 50.8 reading already showing signs of fatigue. A further decline below 50.6 could fuel concerns that high rates are cooling demand faster than expected. Markets will be sensitive to any contraction signals, which could shift expectations toward earlier Fed easing.

Monday, May 5 – 17:00

ISM Non-Manufacturing Prices (Apr)

Previous: 60.9 | Forecast: N/A | Actual: N/A

This inflation component will be crucial in assessing service-sector pricing power. Persistently high readings may reinforce concerns over sticky inflation even as growth slows, complicating the Fed’s balancing act.

Tuesday, May 6 – 20:00

10-Year Note Auction

Previous: 4.435% | Forecast: N/A | Actual: N/A

Investors will watch this closely for signs of demand at the long end of the curve. A weak auction could lift yields and weigh on risk assets, particularly if inflation concerns remain elevated.

Wednesday, May 7 – 21:00
Fed Interest Rate Decision
Previous: 4.50% | Forecast: N/A | Actual: N/A

The Fed is widely expected to hold rates at 4.50%, but the focus will be on the tone of the statement and Powell’s press conference at 21:30. With inflation still above target and growth signals mixed, any hint of dovish bias could trigger USD softness and risk-on flows. Conversely, hawkish pushback would keep yields and the dollar elevated.

Wednesday, May 7 – 17:30
U.S. Crude Oil Inventories
Previous: -2.696M | Forecast: N/A | Actual: N/A
Oil markets will eye this release after recent draws suggest tightening supply. Any surprise could sway inflation expectations and indirectly affect Fed rate trajectory and energy-sensitive equities.Oil-sensitive assets and inflation expectations will react accordingly.

Thursday, May 8 – 14:00
BoE Interest Rate Decision (May)
Previous: 4.50% | Forecast: N/A | Actual: N/A
The Bank of England is set to hike again, but with UK growth faltering and inflation proving sticky, forward guidance will be pivotal. A hawkish hike could support sterling, while dovish rhetoric might push GBP/USD toward recent lows. Conversely, a dovish lean could weigh on GBP/USD, while a firm tightening stance may support sterling in the near term.

Thursday, May 8 – 15:30
U.S. Initial Jobless Claims
Previous: 223K | Forecast: N/A | Actual: N/A
With labor markets cooling slowly, any upside surprise in claims could validate concerns about a broader slowdown. A figure well above 223K could reinforce the soft-landing narrative and bolster expectations for a mid-2025 Fed pivot.

Thursday, May 8 – 20:00
30-Year U.S. Bond Auction
Previous: 4.813% | Forecast: N/A | Actual: N/A

With long-end yields back in focus, this auction will test demand for duration amid slowing data and uncertain Fed guidance. Weak demand could send yields higher, denting rate-sensitive tech and equities. Strong demand may reinforce the notion that peak rates are behind us.