Week ahead »Central Bank Meetings, Inflation Figures and Corporate Earnings!
It could be a volatile week in forex and financial markets in general with the Reserve Bank of New Zealand (RBNZ), Bank of Canada (BOC) and the European Central Bank (ECB) meeting to discuss interest rate policy .
After a rather quiet week due to a lack of economic highlights last week, things pick up a gear this week as central banks and inflation data take center stage. The RBNZ, BOC and ECB meet this week to discuss monetary policy. Everyone will be watching to see which of the central banks is the most aggressive and which (if any) will increase by 50 basis points!
In addition, inflation data from China, the US and the UK are expected. Will China see deflationary pressures? And will the US hit the new 40-year high of inflation? France will also hold its first round of elections on Sunday, although the main event appears to be on April 24. Also, the start of a new quarter means the start of the earnings season. US banks highlight first week gains.
Reserve Bank of New Zealand
The Reserve Bank of New Zealand kicked off central banks on Wednesday this week. In its latest meeting, the RBNZ raised its OCR by 25 basis points for the third consecutive time to 1%. The central bank has indicated that it will begin withdrawing its holdings from its large-scale asset purchase program (LSAP). Inflation stood at 5.9% in the fourth quarter of 2021, well above the central bank target of 1% to 3%. While an increase of only 25 basis points is expected, it is possible for the RBNZ to increase by 50 basis points.
Bank of Canada
The Bank of Canada is next in line to meet on Wednesday this week. In its latest meeting, the BOC raised rates for the first time since October 2018 by 25 basis points to 0.5%. The central bank has indicated that it will continue its reinvestment phase, thus keeping the total amount of bonds on the balance sheet almost unchanged. Inflation was 5.7% yoy in February, the highest level since August 1991. Employment data for Friday in March was strong, with +72,500 new jobs added to the economy.
At this meeting, investors will check whether the central bank starts liquidating its bonds. Additionally, a 25 basis points is expected, but there are strong rumors that the Bank of Canada could increase by 50 basis points.
European Central Bank
Finally, the European Central Bank meets on Thursday. In its latest meeting, the ECB pushed the timetable for the end of its QE program to the third quarter, rather than the fourth quarter. The ECB has since remained dovish as members worry about the effects of the Russian-Ukrainian war inflation on household incomes. However, the latest inflation reading (March) was much stronger than expected at 7.5% y / y versus the 6.6% y / y expectation and the 5.9% y / y reading for February. We need to consider how long the ECB will be able to maintain its dovish stance. Indeed, ECB minutes released last week showed that “a large number of members felt that the current high level of inflation and its persistence call for further immediate steps towards monetary policy normalization.” It would show that there is a pause of concern. Therefore, traders should look at the wording to see if the statement (or at the press conference) suggests the possibility of a rate hike in the fourth quarter of this year!
The French elections will be held this weekend. If a candidate gets 50% of the votes, he is declared the winner. However, this never happened. So why are this weekend’s elections important? Current president Macron has been leading the polls for months, but his lead is narrowed to far-right candidate Marie Le Pen. If Le Pen qualifies for the second round, which will take place on April 24, according to current polls, Le Pen is within the margin of error to win. Traders should watch this weekend’s election outcome. If Macron does not do well, the euro could plummet on Monday.
It’s the start of the earning season! US banks generally kick off the season and this quarter is no different. Some of the major banks to publish their results include C, GS and MS. Other major companies reporting results are: DAL, BLK, BBBY, JPM, C, WFC, GS, MS, TSCO, ASC
There is a lot to watch this week in terms of important economic data. However, the most followed will be inflation data from China, the US and the UK. While still weak, China expects a slight increase in March to 1.2% year on year. The US expects to print 8.4% yoy, well above the Fed’s 2% inflation target. rate of 50 basis points at the May meeting. Could this impression of the CPI confirm this? In the UK, the main CPI is expected to rise to 6.7% in March from 6.2% yoy in February. While still high, MPC members seem a little concerned about the impact on household incomes and, therefore, are not as aggressive as the Fed.
In addition to the inflation data, other important data this week include UK GDP and industrial production, the German ZEW, US retail sales, and Australian employment trends. Additional economic data to be released this week are as follows:
Sunday – April 10, 2022
France: presidential elections (1st round)
Japan: speech by the governor of BOJ Kuroda
China: CPI (MAR)
China: PPI (MAR)
Monday – April 11, 2022
United Kingdom: GDP (FEB)
United Kingdom: Industrial Production (FEV)
United Kingdom: Manufacturing Production (FEV)
Tuesday – April 12, 2022
Germany: IPC (MAR)
United Kingdom: change in the number of applicants (MAR)
Germany: ZEW Economic Sentiment Index (AVR)
United States: CPI (MAR)
New Zealand: Food inflation (MAR)
New Zealand: RBNZ interest rate decision
Japan: Reuters Tankan Index (AVR)
Japan: Machinery Orders (FEB)
Australia: Westpac Consumer Confidence Index (AVR)
China: Balance of trade (MAR)
China: New Yuan Loans (MAR)
Wednesday – April 13, 2022
United Kingdom: inflation data (MAR)
United States: PPI (MAR)
CA: Bank of Canada decision on interest rates
New Zealand: New Zealand Commercial PMI (MAR)
Australia: Change of Employment (MAR)
Thursday – April 14, 2022
EU: European Central Bank decision on interest rates
United States: Retail Sales (MAR)
United States: Michigan Consumer Sentiment Prel (AVR)
Australia: Consumer Inflation Expectations (AVR)
China: House price index (MAR)
China: unemployment rate (MAR)
Friday – April 15, 2022
United States: Industrial Production (MAR)
United States: Manufacturing Production (MAR)
See »Economic calendar
Chart of the Week: Daily Twitter (TWTR)
Twitter’s share price has been aggressively trading lower since October 20, 2021 and hit a short-term low on February 24 at 31:30. The stock then rebounded from those lows and closed on April 1st at 39.31. Last week, Twitter announced that Elon Musk had bought a 9.2% stake in the company. TWTR stock exploded Monday at 47.87 and traded at the resistance at the 200-day moving average and the 61.8% Fibonacci retracement level from the highs of October 20, 2021 to the lows of February 24, nearly 54.57. The stock has since retreated into the gap from last weekend.
The horizontal support in the gap is at 45.09 and 40.96. Below that, support is at the peak of the gap at 39.31 and the 50-day moving average at 37.34. If the stock manages to continue its rise on the stock exchange, the first resistance is at the 200-day moving average near 51.76, then the recent highs of April 5 at 54.57. Above, the stock could move towards the October 27, 2021 open range at 60.16.
It could be a volatile week with RBNZ, BOC and ECB meeting to discuss interest rate policy. Furthermore, the French elections could offer trading opportunities for the euro. And, with all the inflation data coming this week as well, stocks could be in a wild rush if the data releases were positive!
By Joe Perry, CMT, FOREX.com »Official site
Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone relies on such information.