Financial markets are currently betting that the RBA won't be in a position to start lowering interest rates until early next year.


CHINA


China's week kicks off with a string of data releases for May, including home prices, property investment, industrial output, retail sales and fixed asset investment.

Analysts continue to see mixed signals in data gauging the strength of the world's second-largest economy, particularly as rising trade frictions add another layer of uncertainty to its outlook.

ING economists anticipate a smaller drop in home prices in May amid the aggressive policy rollout to rescue the property sector, which has included incentives for local governments to buy the country's large glut of unsold houses.

The other data releases might be flattered by a favorable base effect, but any recovery in consumption and investment is likely to be modest as sentiment remains weak, ING's Robert Carnell, Lynn Song and Min Joo Kang said. "Mixed PMI numbers could signal a weaker industrial production reading as well."

UOB economists expect the data to keep pointing in different directions, forecasting better retail sales growth, but moderating industrial output, and softer fixed-asset investment growth.

China's loan prime rate will be published on Thursday, and is widely anticipated to move in lockstep with the decision on the medium-term lending facility. The MLF is a tool the central bank uses to lend to commercial banks and acts as a guide for the benchmark loan prime rate, which is tied to mortgages and other loans.

Citi economists don't expect any trims to either the MLF or LPR rate, even as weak data spur rate-cut hopes. Chinese banks' profit margins are verging on unsustainable territory, stoking financial stability concerns, they said. A policy rate cut would likely offer limited economic benefits and Chinese policymakers may well want to wait to see the effect of the latest round of easing before rolling out more policy support.


JAPAN


Financial markets await trade and inflation data as they digest the implications of the Bank of Japan's latest policy meeting.

The BOJ said it would reduce its purchases of Japanese government bonds, in a signal of monetary tightening. The central bank refrained from offering a new target, however, saying it would decide on a detailed plan for bond purchases for the next one to two years at its next meeting in July after discussions with market participants.

BOJ Governor Kazuo Ueda said the central bank's reduction of government-bond purchases is likely to be considerable and start soon after the July meeting. Ueda added that it is appropriate for the BOJ to reduce bond purchases in a flexible and predictable manner. Under its new policy, the BOJ's holdings of JGBs are expected to start shrinking. It held more than half of outstanding JGBs as of end-December.

Wednesday's trade data will be watched to see whether Japan's exports have extended their run of growth for a sixth straight month and shaken off the impact of car-production shutdowns earlier this year. The May inflation print, due Friday, will show whether consumer inflation has remained above the BOJ's 2% target. Economists expect inflation to have picked up pace again as the yen remains weak.

ING economists think consumer inflation might have risen close to 3% year-on-year in May from 2.5% in April, boosted by recent utility fee hikes and yen softness.

Also on tap is the Japanese Cabinet's monthly economic report on Tuesday, followed by minutes of the BOJ's April 25-26 meeting on Wednesday and the flash manufacturing PMI for June on Friday.


INDONESIA


Focus is on Bank Indonesia on Thursday, with markets looking to see if the central bank will follow its counterparts in Thailand and Taiwan and keep rates on hold.

After the Indonesian central bank surprised markets with a rate increase in April to prop up a flailing currency, some economists see risks of a follow-up hike. The rupiah is languishing at four-year lows against the dollar.

"We think BI's hiking cycle may not yet be over," Nomura's Euben Paracuelles and Nabila Amani said. Amid high external uncertainty and a widening current account deficit, the central bank will remain keenly focused on pursuing stability in the rupiah, they expect.

Nomura pencils in another 25-basis-point hike in June, on expectations that the deficit will deteriorate substantially and heap more pressure on the currency. It expects rate cuts won't start until 2025.

UOB economists see a pause in June as more likely, citing BI's view that the economy will strengthen in 2024. Barclays economists' base case is also for a hold, but they flag a relatively high risk of a hike.

"USD/IDR is still not far above the levels that triggered the April hike--our base case is predicated on our view that policymakers will still assess the currency as being broadly stable versus April, and thus not yet in need of a rate hike for support," Barclays said.

Indonesia also reports trade data for May on Wednesday, which will give an indication of how exports are faring midway through the second quarter.


(All references to days are in local times.)


--Additional reporting by Megumi Fujikawa, James Glynn, Ronnie Harui, Xiao Xiao, Miriam Mukuru and Emese Bartha


Write to: Jessica Fleetham at jessica.fleetham@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@dowjones.com


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