The S&P 500 at 3000 is looking very likely this week; the runaway train that is US equities got another solid boost last week from some exceptional employment data, an ever so supportive President and a seemingly impotent Federal Reserve Bank.
With first quarter GDP at 3.2% Y/Y, the unemployment rate down to 3.6%, buoyant consumer confidence and stock markets on fire, I would have thought the Fed would have enough information at hand to impose some measure of calm on the markets.
But no. Some waffle about inflation being transitory (which at least checked the view that a cut is in order) and more of the same about “a patient approach” was the guidance the market received. The upshot of which was a slightly higher US 10-year treasury note yield.
The S&P needs only to rise by 2% to breach 3000, with nothing really significant to challenge US equities until Friday’s US inflation report. Can CPI can top 2.0%? Consensus expectations are 2.1% Y/Y for April. Will US inflation at 2.0 % rattle the markets? The answer is probably not!
For those who follow currencies there will be a small amount of excitement in Australia and New Zealand this week with their respective Central Banks both announcing interest rate decisions. There are calls for cuts in both countries with perhaps more noise in New Zealand to cut from 1.75% to 1.5%. I feel the Reserve bank of Australia will leave rates unchanged at 1.5%.
Both the Australian and New Zealand dollar have come under some pressure in recent weeks from the US dollar. It will take a courageous trader to have a position during the interest rate announcements. AUDNZD may also be volatile this week.
China CPI is released on Thursday expected at 2.5% Y/Y for April which may vicariously give the Australian dollar a boost.
In the UK, the pound rallied somewhat last week, and the odds are now on a cross-party BREXIT deal after both the Conservative and Labour parties suffered huge losses in local council elections. Voters expressed their protest by voting against the UK’s two major political parties.
The pound may get a further lift this week when UK GDP is announced on Friday. Expectations are for a first quarter Y/Y print of 1.8%.
The major Eurozone announcements are Eurozone Retail Sales on Monday expected at 1.6% Y/Y for March, German Industrial Production on Wednesday expected at -2.7% Y/Y for March and a speech by European Central Bank President Mario Draghi on Wednesday lunchtime, covering the minutes of the latest ECB monetary policy meeting.
The Bank of Japan also releases minutes of its monetary policy meeting early on Wednesday morning. Canadian employment numbers are expected on Friday with 15,000 new jobs expected to have been created and the unemployment rate to remain steady at 5.8%.
Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.
