The coming week is expected to be light on major events or dramatic headlines—no new promises from Donald Trump to shake the world. Nevertheless, there will still be factors worth watching that could trigger local market movements.

First and foremost, traders will focus on a wave of speeches and comments from members of the Federal Reserve. Investors are particularly interested in the stance of voting FOMC members in light of recent U.S. inflation data and other key economic indicators. Additionally, upcoming consumer inflation reports from the UK and the eurozone, though they have recently lost much of their market-moving power, may still hint at the future direction of European Central Bank and Bank of England monetary policy.

But before diving into these events, let's focus on the U.S. manufacturing data expected this week. These figures will help traders understand the state of the real economy and assess whether recession risks are increasing.

Specifically, the manufacturing PMI for May is forecast to fall below the 50-point threshold, from 50.2 in April to 49.9. PMI services are also expected to decline slightly, from 50.8 to 50.7. If these reports come in at or below expectations, it will signal ongoing weakness in the U.S. economy. Should this trend persist, it may be time to consider the possibility of a full-scale recession in the U.S., which would bring obvious negative implications for the dollar and U.S. equities.

Markets are hoping to hear from Fed officials any hint of when rate cuts might resume, particularly as consumer inflation edges closer to the 2% target. Whether they provide such clarity remains to be seen. So far, Fed Chair Powell has maintained a neutral stance, observing economic developments without committing to action.

Now, turning to the consumer inflation reports from the eurozone and the UK, annual inflation is expected to hold steady at 2.2% in the eurozone. In the UK, however, it is forecast to jump sharply from 2.6% to 3.3%.

Given the outlook for rate cuts, such as one expected from the Reserve Bank of Australia tomorrow, it's likely that the ECB and BoE will pause any further monetary easing for now, aligning their actions with the Fed's cautious approach.

Overall Market Outlook for the Week:

There's a chance that previous market trends could slow down due to a lack of strong drivers and Friday's downgrade of the U.S. credit rating by Moody's from AAA to Aa1. While Treasury Secretary Bessent downplayed the move, calling it a "lagging indicator," markets view it as a serious warning that could justify a local correction in U.S. equities—and possibly beyond.

Day Forecast:

AUD/USD

The pair has stalled ahead of the RBA policy meeting. A rate cut is expected, which could lower the pair toward 0.6320. The 0.6370 level could serve as a potential sell point.

GBP/USD

The pair is trading higher amid expectations of rising UK inflation, which could reduce the likelihood of further Bank of England rate cuts. On this basis, the pair could rise toward 1.3440, overcoming the resistance level at 1.3340. A potential buy level is at 1.3356.