The Federal Reserve Building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid

April 29 (Reuters) – Some big beasts of the central banking world take center stage over the coming week, with the U.S. Federal Reserve, Bank of England and Reserve Bank of Australia holding meetings policies.

A reading of China’s economic health is also expected, as an unprecedented default on Russian sovereign debt looms.

And did someone say dollar?

Here’s a look at the week ahead in the markets of Tom Westbrook in Singapore, Ira Iosebashvili in New York, Dhara Ranasinghe, Sujata Rao and Karin Strohecker in London.

The Fed’s increasingly hawkish rhetoric has sparked a sell-off in the stock and bond markets, and on Wednesday we’ll see how aggressive the central bank plans to be in the coming months.

The Fed announced a 50 basis point interest rate hike on May 4, and investors expect monetary tightening of 240 basis points in 2022. Many believe the Fed will continue to surprise on the hawkish side, as she struggles to mitigate the worst. inflation in four decades. L2N2WK2GX

Markets will also focus on the Fed’s plans for its nearly $9 trillion balance sheet, which it could start unwinding as early as May. Read more

2/FOUR IN A ROW

The Bank of England meeting, a day after the Fed, is set to raise interest rates for the fourth consecutive time, the first time it has done so since 1997. read more

BoE boss Andrew Bailey said the bank was walking a “very tight line” between controlling inflation, which at 7% is more than three times its target, and preventing a recession.

A quarter-point rise to 1% would fulfill a precondition for the BoE to start actively selling the bonds it holds. A big question for the markets is when will these sales begin; estimates range from June to well into 2023. read more

Active bond sales would tighten monetary conditions, but could hurt a faltering economy and no major central bank has yet started the process.

3/DOLLAR THE DESTROYER

April is said to be the cruelest month and it certainly has been for anyone on the wrong side of the dollar trade.

A 5% rise in the dollar index, driven by safe-haven flows and an ultra-hawkish Fed, triggered sharp falls in the euro and yen, as well as emerging market currencies the yuan on your mind.

These measures tighten global financial conditions, which can lead to slower economic growth. Companies in Japan, Germany and elsewhere face higher import costs for dollar-priced materials and components.

Some past Fed tightening cycles have weakened the US currency once they started. This time however, comparisons are drawn to 1994, when 300 bps of rate hikes sent the dollar index up 4.6% (after a 10.5% jump in 1993). These moves were blamed for subsequent waves of emerging market crises.

4/ FROM CHINA TO AUSTRALIA

The yuan, down 4% this month, could fall further if weekend data shows Chinese factory activity continues to weaken.

Beijing, for now at least, appears to view the yuan as its main policy lever, much to the disappointment of stock markets which had hoped for more explicit government aid or a relaxation of strict COVID lockdown rules. Read more

China’s slowdown also applied a career discount, sending the Australian dollar down around 4.5% through April.

With recent data showing Australian inflation in the first quarter at 20-year highs, it is expected that an upward cycle could begin as early as Tuesday.

Swap pricing and several economists believe a 15 basis point rate hike is likely Read More .

GAS & FAULT

Moscow has upped the ante in its standoff with Western capitals over payments for gas shipments. He cut off gas to Poland and Bulgaria after they refused to accept his demand for payments in rubles rather than euros read more.

The European Commission has warned that ruble payments could breach sanctions, but officials are still struggling to clarify the European Union’s position on Moscow’s payment system.

The elephant in the room is Germany – Russian gas accounts for around a third of its total gas consumption, so the economy could slide into recession if supplies are cut.

Meanwhile, time is running out for Russia to make a payment on its sovereign bonds which was due on April 4. Failure to pay within a 30-day grace period would put it in default.

Compiled by Karin Strohecker Editing by Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.