After a rather quiet week due to the lack of economic highlights last week, things kick into high gear this week as central banks and inflation data take center stage. The RBNZ, BOC and ECB are all meeting this week to discuss monetary policy. Everyone will be watching to see which of the central banks is the most hawkish and which (if any) will rise by 50 basis points! In addition, inflation data is expected from China, the United States and the United Kingdom. Will China see deflationary pressures? And will the United States hit a new 40-year high in inflation? France is also holding its 1st election round on Sunday, although the main event appears to be on April 24and. Moreover, the start of a new quarter means the start of earnings season. US banks highlight first week earnings.
The Reserve Bank of New Zealand kicks off central banks on Wednesday this week. At its last meeting, the RBNZ raised the OCR by 25 basis points for the third consecutive time to 1%. The central bank has indicated that it will start unwinding its holdings under its Large Scale Asset Purchase Program (LSAP). Inflation stood at 5.9% in the fourth quarter of 2021, well above the central banks’ target of 1% to 3%. Although a rise of only 25 basis points is expected, it is possible that the RBNZ will rise by 50 basis points.
The Bank of Canada is next in line to meet on Wednesday of this week. At its last 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 its balance sheet roughly unchanged. Inflation was 5.7% year-on-year for February, its highest level since August 1991. Friday’s jobs data in March was strong, with +72,500 new jobs added to the economy. At this meeting, investors will monitor whether the central bank begins to unwind its bond holdings. In addition, a 25 basis points is expected, but there are strong rumors that the BOC could increase by 50 basis points.
Finally, the European Central Bank meets on Thursday. At its last meeting, the ECB brought forward the timetable for the end of its QE program to Q3, rather than Q4. The ECB has remained dovish since then as members worry about the effects of inflation from the Russian-Ukrainian war on household incomes. However, the latest inflation reading (March) was much stronger than expected at 7.5% YoY versus an expectation of 6.6% YoY and a reading of 5.9% YoY for February. . We have to consider how much longer the ECB will be able to maintain its accommodating position. Indeed, ECB minutes published last week showed that “a large number of members felt that the current high level of inflation and its persistence called for further immediate steps towards the normalization of monetary policy”. . It would show that there is a pause for worry. Therefore, traders should watch 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 take place this weekend. If a candidate obtains 50% of the votes, he is declared the winner. However, this never happened. So why is this weekend’s election important? Current President Macron has been leading in 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 be held on April 24and, so based on current polls, Le Pen is within the margin of error to win. Traders should watch the outcome of this weekend’s election. If Macron does not do well, the euro could plunge on Monday.
It’s the start of earnings season! US banks typically kick off the season, and this quarter is no different. Some of the biggest reportable banks include C, GS, and MS. Other important companies reporting earnings are: DAL, BLK, BBBY, JPM, C, WFC, GS, MS, TSCO, ASC
There’s a lot to watch this week in terms of important economic data. However, the most watched will be inflation data from China, the US and the UK. Although 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. Fed members were out in force last week, promoting this possibility of a 50 basis point rate hike at the May meeting. Could this CPI impression confirm it? In the UK, headline CPI is expected to rise to 6.7% in March from 6.2% year-on-year in February. While still elevated, MPC members seem a little concerned about the impact on household incomes and, therefore, are not as hawkish as the Fed.
In addition to inflation data, other important data this week includes UK GDP and industrial production, German ZEW, US retail sales and Australian employment developments. . Additional economic data due for release this week includes:
- France: Presidential election (1st Round)
- Japan: Speech by BOJ Governor Kuroda
- China: IPC (MAR)
- China: PPI (MAR)
- UK: GDP (FEB)
- United Kingdom: industrial production (FEB)
- United Kingdom: manufacturing output (FEB)
- Germany: IPC (MAR)
- United Kingdom: Change in the number of applicants (MAR)
- Germany: ZEW Economic Sentiment Index (April)
- United States: CPI (MAR)
- New Zealand: Food Inflation (MAR)
- New Zealand: RBNZ Interest Rate Decision
- Japan: Reuters Tankan Index (APR)
- Japan: Machinery Orders (FEB)
- Australia: Westpac Consumer Confidence Index (APR)
- China: trade balance (MAR)
- China: New loans in yuan (MAR)
- United Kingdom: inflation data (MAR)
- United States: PPI (MAR)
- CA: BOC decision on interest rates
- Crude inventories
- New Zealand: New Zealand Business PMI (MAR)
- Australia: job change (MAR)
- EU: ECB decision on interest rates
- United States: Retail Sales (MAR)
- United States: Michigan Consumer Sentiment Prel (APR)
- Australia: Consumer Inflation Expectations (APR)
- China: House Price Index (MAR)
- China: unemployment rate (MAR)
- United States: Industrial Production (MAR)
- United States: manufacturing output (MAR)
Chart of the Week: Daily Twitter (TWTR)
Source: Tradingview, Pierre X
Twitter had been in aggressive decline since October 20and2021 and reached a short-term low on February 24and at 31.30 p.m. The stock then bounced off those lows and closed on April 1.st at 39:31. Enter Elon Musk. Twitter announced that Elon Musk had purchased a 9.2% stake in Twitter. The stock opened at 47.87 on Monday and traded against resistance at the 200-day moving average and the 61.8% Fibonacci retracement level from the October 20 highs.and2021 to Feb 24 lowsand, nearly 54.57. The stock has since retreated into the gap from last weekend. Horizontal support in the gap is at 45.09 and 40.96. Below that, support is at the height of the gap at 39.31 and the 50-day moving average at 37.34. If TWTR manages to continue higher, first resistance is at the 200-day moving average near 51.76 and then the recent highs from April 5and at 54.57. Above there, the stock can move to the gap open from October 27and2021 at 60.16.
It could be a volatile week with the RBNZ, BOC and ECB all meeting to discuss interest rate policy. In addition, the French elections could provide trading opportunities for the euro. And, with all the inflation data due this week as well, stocks could be in for a wild ride if the data comes out hot!
Have a good week-end!