LONDON (Reuters) -There’s no shortage of events, data and high drama for markets in the days ahead.

Wrangling over the debt ceiling in Washington continues, Greek voters head to the polls and data from the United States to China and Europe could show just how quickly inflation and economic growth are easing.

Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf in New York, Naomi Rovnick in London and Yoruk Bahceli in Amsterdam.

1/ USA WATCH   

    Critical U.S. inflation data will allow investors to gauge whether the Federal Reserve will be able to pause its interest rate hiking cycle, as many on Wall Street expect.

The personal consumption expenditures (PCE) price index, tracked by the Fed, is due on Friday for April.

The index gained 0.1% in March. That was the smallest rise since July and, with the consumer price index slowing in April to below 5% on annual basis, hope for peak rates has grown.

    Minutes from the Fed’s latest meeting on Wednesday, could provide more clues on whether a rate pause is nearing.

    Also looming for markets is the June 1 deadline for when the federal government may default on some debts unless the nation’s debt ceiling is lifted. There are some positive signs for a deal, but any headlines suggesting an agreement remains out of reach will likely weigh on markets.

2/ STUTTERING

Sentiment towards China is turning, as a lackluster consumer cuts short the post-pandemic recovery that was supposed to offset U.S. and European downturns.

The yuan hit 5-1/2 month lows in recent days and Citi’s economic surprise index for China is at its lowest since January. Expectations for stimulus – monetary, fiscal or both – are rising. Though China kept its benchmark lending rates unchanged for the ninth month in May.

Meanwhile geopolitical strains are increasing after a joint G7 communique issued on Saturday singled out China on issues from Taiwan and nuclear arms, to economic coercion and human rights abuses, underscoring wide-ranging tensions between Beijing and the group of rich countries, including the U.S.

Friday’s Tokyo consumer price figures, which front-run the national data by several weeks, are in focus for Bank of Japan watchers. Traders have all but given up on a June hawkish BOJ shift in June, potentially setting markets up for a nasty surprise on a very strong print.

    The Reserve Bank of New Zealand meets Wednesday, and expectations for a half point rate hike have crept up after a more expansionary than expected budget.

3/ TEFLON PMI

For stocks, good data can be bad news.

S&P Global’s U.S. composite purchasing managers’ index, viewed as a real-time gauge of business conditions, has risen for five months. If the improvement continues in the next survey, out May 23 alongside PMIs globally, that may disappoint investors who have chased equity valuations higher because they expect a recession.

Big tech stocks that dominate U.S. indices can do well when the economy is weak, as this encourages bets the Fed will cut rates, boosting risk appetite for companies with early-stage innovation baked into their business plans.

For Europe, the picture is mixed. Better-than-expected PMIs could benefit regional stocks. But the Stoxx Europe 600 index, up 10% this year, has also been supported by U.S. recession fears driving investors to diversify into Europe.

4/ FADING STAR

Sterling is the best performing major currency against the dollar so far this year, thanks partly to expectations the Bank of England will raise rates further from the current 4.5%.

Yet this narrative could lose steam if Wednesday’s April inflation data shows price rises are moderating.

    UK inflation was 10.1% in March, the highest in Western Europe. But since then, some signs of cooling job market inflation have emerged, with Britain’s unemployment rate edging up to 3.9%. And while annual wage growth held at 5.8% in March, there was a further decline in the number of people moving jobs.

    Some economists reckon wage growth will weaken ahead, suggesting UK rates may have peaked – and sterling’s strength with it. 

5/ TO THE POLLS, AGAIN?

Greece’s ruling New Democracy party stormed to a crushing victory in a parliamentary election on Sunday but fell just short of the threshold needed to form a government on its own, making a runoff election in a month more likely.

From Monday, Greek President Katerina Sakellaropoulou will give the top three parties – New Democracy, Syriza and the Socialist PASOK – three days each in turn to form a coalition government. If they all fail, a caretaker government will be appointed to prepare new elections about a month later.

Markets cheered the results – Greek bond yields dropped, spreads tightened and shares rallied in response, extending their recent outperformance.

Many hail the election as the last step to Greece reclaiming an investment-grade credit rating, over a decade after it was downgraded to junk.

(Compiled by Dhara Ranasinghe and Karin Strohecker; Editing by Toby Chopra)

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