By Jonathan Cable
LONDON (Reuters) - Euro zone policymakers get their main monthly chance this week to adjust their rhetoric about further monetary stimulus, although with inflation creeping a bit higher there, talk is more likely than action.
Markets will also keep an eye on purchasing managers' surveys, due early in the week from around the world, to see how the global economy fared at the start of the second quarter.
Fighting between Ukraine's army and pro-Russian groups in the east has intensified and a further deterioration in the region has the potential to spook markets, which have been paying less heed to the trouble in recent weeks.
While several major central banks meet to decide policy in the week and the chair of the U.S. Federal Reserve will testify in front of lawmakers, the European Central Bank's meeting and press conference will be the main focus.
ECB President Mario Draghi and the Governing Council meet with a tiny bit of pressure taken off by a modest rise in very low inflation and by business surveys showing a more broad-based, but still fragile recovery.
"To some extent, the bounceback in inflation has helped take some of the sting out of the tail at the meeting, with the (ECB) Governing Council under less pressure to act quickly," said Philip Shaw, chief economist at Investec.
What has got financial markets excited is the prospect of quantitative easing from the ECB at some point in the future, and what another wave of cash might do to asset prices.
But it is clear that any bond-buying program similar to what the Bank of England has already done and what the Federal Reserve is now winding down after half a decade is probably a way off, if it ever happens at all.
Euro zone inflation rose last month, but only to 0.7 percent, so still well below the ECB's 2 percent target ceiling and within what the central bank regards as a "danger zone".
The euro is also very strong, keeping inflation low through capping import prices. A Reuters poll of economists found that if the euro rose to $1.40 from the $1.385 it's at now, that would trigger action from the ECB. But few investors and analysts are convinced that even Japanese-style money printing would decisively weaken the euro.
For now, euro zone monetary policy is likely to remain steady based on the view that a more broad-based recovery is taking hold and that inflation has already fallen as low as it will go, according to a Reuters poll.
"What Draghi says about the likelihood of further easing measures is going to be key to market moves next week," Shaw said.
Janet Yellen, Chair of the U.S. Federal Reserve, will give testimony to the Joint Economic Committee of Congress on Wednesday, probably including a discussion of positive trends in the recovery but asserting that accommodative policy is still needed to encourage sustained job growth.
U.S. growth stalled in the first quarter, weighed down by an unusually cold and disruptive winter, although upbeat data such as consumer spending and industrial production suggest the 0.1 percent annual pace was a blip and not a reflection of the economy's otherwise sound fundamentals.
Job growth increased at its fastest pace in more than two years in April and the unemployment rate dived to a 5-1/2 year low of 6.3 percent, suggesting a sharp rebound in economic activity early in the second quarter.
The Bank of England also meets, but no action is expected, as a strong economic recovery gathers momentum and inflation holds below target. But a growing concern is a return to boom times for Britain's property market.
"The major central banks share the markets' - and our - view that global growth is on a strengthening trend and that inflation will trough and pick up," said John Calverley at Standard Chartered.
In emerging markets, central banks in Korea, Indonesia, Malaysia, Philippines, Czech Republic, Poland, and Peru are also all expected to keep their key policy rates unchanged.
Minutes from the Bank of Japan's April 30 meeting may help explain why it stood pat, probably as it waits for waves created by a recent sales tax hike to calm.
CALENDAR LIGHT FOR DATA
Chinese data are expected to show both exports and imports recording improved annual growth rates.
Growth in China, the world's second-largest economy, slumped to its slowest in 18 months in the first quarter of this year as government reform efforts and lackluster demand for exports took their toll.
But Beijing will not relent by loosening policy to shore up its economy or calm a volatile money market, even though it has entered a "painful" phase of restructuring, Premier Li Keqiang wrote in remarks published on Thursday.
China's HSBC/Markit PMI will be watched to see whether factory activity will show an overall contraction for the fourth straight month, as preliminary readings suggested. An official PMI last week showed growth.
ISM non-manufacturing numbers will be the data highlight in a very light week for the United States, expected to build on March's upbeat survey.
Euro zone and British PMIs for the service industry - which makes up the bulk of these economies - are expected to show robust growth. Sister surveys last week showed recovery in manufacturing accelerated.
(Editing by Ruth Pitchford)