Friday's decline caused the dollar to give up some of its gains in the previous two days, with data released on Wednesday showing that the US consumer price index rose the most in nearly 12 years. Despite the Fed's pledge to keep interest rates low in the face of rising inflation, some market participants are betting that the Fed will be forced to act sooner than expected, making the dollar more attractive.

Retail sales were flat in April from the previous month, the Commerce Department said on Friday, with March data revised to 10.7 per cent, the second-largest increase on record, boosted by stimulus checks, which rose 9.7 per cent. Retail sales are expected to accelerate in the coming months against the backdrop of record savings and an economic restart. Jonas Goltermann, a senior economist, believes that weak economic data-last week's non-farm payrolls report and Friday's retail sales-and evidence of rising inflation mean that a big rise in the dollar will not be easy. The prospect of monetary policy normalisation remains key. The minutes of the April meeting of the Fed's Federal Open Market Committee, to be released this week, may provide some further clues to policymakers' intentions in this regard. For the dollar to continue its recent rebound, bond yields will need to continue to rise, while markets will also need to advance Fed interest rate hikes; if bond yields cannot rise, the combination of rising US inflation and still loose Fed policy should be bad for the dollar.

The euro rose 0.50% against the dollar to 1.2141, the biggest gain in a week, as speculation was active and the Swiss franc approached a more than two-month high against the dollar. Wall Street rebounded on Thursday and Friday after falling earlier in the week. The rebound in risk appetite that underpinned US stocks also helped support the euro. Sterling rose about 0.80 per cent last week on bets on a strong recovery in the UK economy and expectations that a referendum on Scottish independence could be a long way off.

Looking ahead, the Fed will release minutes of its April meeting on Wednesday, which will attract a lot of attention after higher-than-expected consumer and producer inflation in April. At the same time, a number of Fed officials made their debut speeches this week. European regulations will be released, Germany, the euro zone, the United Kingdom in May manufacturing PMI initial figures.

Focus of The Week: 

Monday: the annual rate of retail sales of consumer goods in China in April, and the annual rate of industrial added value above the scale of April in China-YTD. Federal Reserve Vice Chairman Clarida spoke.

Tuesday: the initial real GDP quarterly rate after the first quarter adjustment in Japan, the three-month ILO unemployment rate in the UK in March, the initial GDP quarterly rate in the euro zone in the first quarter, the trade account after the quarterly adjustment in March in the euro zone, the annualized monthly rate of housing starts in the United States in April, and the monthly rate of construction permits in the United States in April. The annual meeting of the World Economic Forum was held.

Wednesday: us API crude inventory movement in the week ended May 14, US EIA crude inventory change in the week ended May 14, UK retail price index annual rate in April, UK April unseasonally adjusted PPI annual rate, UK April CPI annual rate, euro zone April unseasonally adjusted CPI annual rate, Canada April CPI annual rate. In 2021, Bostick, chairman of the FOMC voting committee and chairman of the Atlanta Federal Reserve, delivered a speech.

Thursday: Japan's unseasonally adjusted merchandise trade account in April, Australia's quarterly unemployment rate in April, the gap in CBI industrial orders in the UK in May, and initial jobless claims in the United States in the week ended May 15. The Federal Open Market Committee of the Federal Reserve released the minutes of its policy meeting from April 27 to 28, 2021.

Friday: UK May Gfk consumer confidence index, Japan April national CPI annual rate, France May Markit manufacturing PMI initial value, Germany May Markit manufacturing PMI initial value, Euro zone May Markit manufacturing PMI initial value, UK May Markit service industry PMI initial value, UK May Markit manufacturing PMI initial value, US April existing home sales annualized total, euro zone May consumer confidence index. Kaplan, chairman of the Dallas Federal Reserve, spoke.

Saturday: the total number of wells drilled in the United States in the week ended May 21.

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