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Last week was an eventful one, to say the least, a robust economic data is coming not only from the US but from the EU, UK, Australia, New Zealand, and China. This is pointing to synchronize global economic recovery, and although that is great for all types of businesses, it is not that great for the liquidity and speculators relying on it. Strong economic recovery means that the Central Banks will need to reduce their emergency bond purchasing programs, so-called QE (Quantitative easing).
Last week Bank of England joined the Bank of Canada, announcing that the BoE will reduce the pace it buys government debt to 3.4 billion pounds a week, 1 billion pounds lower than the previous amount. Despite this announcement from BoE, this is not a sizeable change in their policy because, in their forecast, the bank still expects that their stock of purchased gilts to be at 879£ billion for 2022 Q2, for 2023 Q2 at 881£ billion, and 880£ billion for the Q2 of 2024.
On Friday we had a hint from ECB’s Kazaks that decision to slow bond buying possible in June, and we saw a reaction in the EUR right away. However, even if the ECB reduced the bond purchasing under PEPP, they might increase purchasing under their regular APP QE program. Therefore, the June ECB meeting will be an important and perhaps impactful one.
In the USA, it was also an eventful week, first comments from the US Treasury Secretary Janet Yellen, which said that the interest rates have to be raised at some point to prevent overheating the US economy. Her comments moved the stock markets to the downside, and she quickly added that she is not suggesting that the interest rates need to change now, nor that she suggests that the FED need to do anything at the moment. In the past week, we had speeches from many members of the FOMC, and with a few exceptions, all of them repeated that it is too early to even talk about QE tapering, adding that if the inflation rises, the FED has many tools to act. The miss in the Non-Farm Payrolls for APR on the Friday , which came out at 266K vs expectation for 950K, seems to support the FOMC assessment.
Last Thursday, in its semiannual Financial Stability Report, the FED warned that “Asset prices may be vulnerable to significant declines should risk appetite fall.” Considering that S&P 500 is close to our target for 2021 and that NASDAQ 100, Russell 2000 are also close to our 2021 target, and it is only the begging of May, talk for itself about, the tempo of the gains in the stock market indexes.
Next week will be an interesting one, are we going to finally see breakouts in the AUD/USD, GBP/USD, NZD/USD, EUR/USD to which the technical analysis is pointing. Review our technical analysis for the FXCM dollar index and the DXY index for details. A potential pullback in the stock markets easily can move the USD to the upside, and once again, derail the breakout in the dollar. Also, the US inflation report on Wednesday can affect both the dollar and the stock markets significantly.
The spat between Australia and China continues, last week China announced that China State Planner to suspend indefinitely all activities under the China-Australia Strategic Economic Dialogue Mechanism.
The focus for the week ahead is on the following events:
Monday, May 10, 2021
- Australia NAB Business Confidence APR
- Australia Retail Sales MoM Final MAR
- UK Halifax House Price Index YoY APR
- UK Halifax House Price Index MoM APR
- US ISM New York Index APR
- US Consumer Inflation Expectations APR
- US Fed Evans Speech
Tuesday, May 11, 2021
- Japan Household Spending MoM MAR
- Japan BoJ Summary of Opinions
- Australia HIA New Home Sales MoM APR
- China Inflation Rate YoY APR
- China PPI YoY APR
- Germany Wholesale Prices MoM APR
- Italy Industrial Production MoM MAR
- EA ZEW Economic Sentiment Index MAY
- Germany ZEW Economic Sentiment Index MAY
- Germany ZEW Current Conditions MAY
- US Redbook YoY 08/MAY
- US JOLTs Job Openings MAR
- UK BoE Gov Bailey Speech
- US Fed Williams Speech
- US Fed Brainard Speech
- US Fed Daly Speech
- US Fed Bostic Speech
- US API Crude Oil Stock Change 07/MAY
- China Vehicle Sales YoY APR
- China New Yuan Loans APR
- China Outstanding Loan Growth YoY APR
- China M2 Money Supply YoY APR
- China Total Social Financing APR
Wednesday, May 12, 2021
- New Zealand Electronic Retail Card Spending MoM APR
- New Electronic Retail Card Spending YoY APR
- South Korea Unemployment Rate APR
- Australia Building Permits MoM Final MAR
- Japan Leading Economic Index Prel MAR
- Germany Inflation Rate YoY Final APR
- Germany Inflation Rate MoM Final APR
- Germany Harmonised Inflation Rate YoY Final APR
- Germany Harmonised Inflation Rate MoM Final APR
- UK Balance of Trade MAR
- UK Construction Output YoY MAR
- UK GDP Growth Rate QoQ Prel Q1
- UK GDP Growth Rate YoY Prel Q1
- UK Industrial Production YoY MAR
- UK Industrial Production MoM MAR
- UK GDP 3-Month Avg MAR
- UK Manufacturing Production YoY MAR
- UK Business Investment QoQ Prel Q1
- UK Business Investment YoY Prel Q1
- UK Goods Trade Balance MAR
- UK GDP YoY MAR
- UK Manufacturing Production MoM MAR
- UK GDP MoM MAR
- UK Construction Orders YoY Q1
- France Inflation Rate YoY Final APR
- France Inflation Rate MoM Final APR
- France Harmonised Inflation Rate MoM Final APR
- France Harmonised Inflation Rate YoY Final APR
- ECB Enria Speech
- ECB Non-Monetary Policy Meeting
- EA Industrial Production YoY MAR
- EA Industrial Production MoM MAR
- UK BoE Gov Bailey Speech
- US MBA Mortgage Applications 07/MAY
- US MBA 30-Year Mortgage Rate 07/MAY
- US Core Inflation Rate YoY APR
- US Inflation Rate YoY APR
- US Inflation Rate MoM APR
- US Core Inflation Rate MoM APR
- US Fed Clarida Speech
- US EIA Crude Oil Stocks Change 07/MAY
- US EIA Cushing Crude Oil Stocks Change 07/MAY
- US EIA Gasoline Stocks Change 07/MAY
- US EIA Heating Oil Stocks Change 07/MAY
- US EIA Refinery Crude Runs Change 07/MAY
- US Monthly Budget Statement APR
Thursday, May 13, 2021
- New Zealand Food Inflation YoY APR
- Japan Current Account MAR
- Japan Foreign Bond Investment 01/MAY
- Japan Stock Investment by Foreigners 01/MAY
- Japan Bank Lending YoY APR
- Australia Consumer Inflation Expectations MAY
- UK BoE Cunliffe Speech
- US Initial Jobless Claims 08/MAY
- US Jobless Claims 4-week Average MAY/08
- US PPI MoM APR
- US PPI YoY APR
- US Continuing Jobless Claims 01/MAY
- US Core PPI YoY APR
- US Core PPI MoM APR
- US EIA Natural Gas Stocks Change 07/MAY
- US BoC Gov Macklem Speech
- UK BoE Gov Bailey Speech
- US Fed Waller Speech
Friday, May 14, 2021
- South Korea Export Prices YoY APR
- South Korea Import Prices YoY APR
- New Zealand Business NZ PMI APR
- France Unemployment Rate Q1
- Spain Harmonised Inflation Rate YoY Final APR
- Spain Harmonised Inflation Rate MoM Final APR
- Spain Inflation Rate YoY Final APR
- Spain Inflation Rate MoM Final APR
- Canada New Motor Vehicle Sales MAR
- Canada Manufacturing Sales MoM MAR
- Canada Wholesale Sales MoM Final MAR
- US Retail Sales MoM APR
- US Retail Sales Ex Autos MoM APR
- US Export Prices YoY APR
- US Export Prices MoM APR
- US Import Prices YoY APR
- US Import Prices MoM APR
- US Retail Sales YoY APR
- US Industrial Production YoY APR
- US Industrial Production MoM APR
- US Manufacturing Production YoY APR
- US Manufacturing Production MoM APR
- US Capacity Utilization APR
- US Business Inventories MoM MAR
- US Michigan Consumer Sentiment Prel MAY
- US Michigan Inflation Expectations Prel MAY
- US Michigan Consumer Expectations Prel MAY
- US Michigan 5 Year Inflation Expectations Prel MAY
- US Michigan Current Conditions Prel MAY
- Canada BoC Senior Loan Officer Survey
- US Baker Hughes Oil Rig Count 14/MAY
