December 3, 2022
  • December 3, 2022

Week ahead: recap / overview of central bank, recovery and jobs

By on May 1, 2021 0

More central banks this week with the RBA and BOE to come

This weekend begins in May and brings the holidays on Mondays to UK, China and Japan. With a busy week through to the end of April, including an extremely accommodating FOMC and BIG tech benefits, the focus is mostly on the coronavirus, or let’s say healing the coronavirus. More central banks will meet this week to discuss monetary policy with the RBA and BOE on demand. Also, roughly halfway through earnings season, we will receive reports from around 1,450 companies, but only a few may be market players. Additionally, the start of a new month brings month-to-month data, including New Zealand’s first quarter employment development, Canada employment development, and the much anticipated report. NFP of the United States. These figures will be revealing for the recovery!

Central bank summary

The Bank of Canada recently reduced its bond buying program from C $ 4 billion to C $ 3 billion per week. They shrink. However, parts of the country are still under lockdown due to the coronavirus. That includes Ontario, which reported Thursday that its hospital’s intensive care units were at full capacity. Although Canada reported +303,000 jobs in March, it expects -210,000 in Friday’s April report (mostly due to lockdowns). Compare that to the monetary policy of the US Federal Reserve, which met last week. The FOMC has pledged to buy $ 120 billion in bonds and MBS per month. Fed Chairman Powell has said they won’t go down until they see “substantial further progress,” which will take some time. They also need to see a “chain” of months of data that points to the achievement of their targeted goals. Coronavirus cases are due to only 55,000 per day (compared to 300,000 on January 8e). More than 30% of the population is fully vaccinated. The March jobs report was +916,000 and the expectation for the April report is +900,000. By the way, returns are rising. The European Central Bank is in the same book as the United States, but not on the same page. Locks and restrictions are about to expire, just as the vaccination rollout finally picks up speed. Christine Lagarde even said this week that she expects 70% of the EU population to have received at least 1 hit by the end of June! So, who is right? When will the Fed’s signal go down? The Fed is traditionally “behind the curve”. Since the Fed is looking for actual data, not forecast data (i.e. June dot charts), it might not announce plans to relax in late summer or autumn. The timing of the tapering announcement will determine market directions.

Upcoming central bank meetings

This week we’ll see which pages are the Reserve Bank of Australia and the Bank of England. The RBA has already reported them to the Fed and the ECB. In fact, after the last RBA meeting, the central bank launched its second A $ 100 billion bond purchase program. Don’t expect much of a change from the RBA this week, but it could face the upside from Australia as commodity prices rise around the world. The BOE is another story. The UK is open for business! Retail sales for March were 5.4% versus an expectation of 1.5% and the manufacturing and services PMIs were 60+, the best levels since the start of the pandemic. Vaccinations are continuing, with nearly two-thirds of populations having received at least 1 injection. It is said that the BOE may mention the forbidden word in the United States – TAPERING! (Am I old enough to remember when there was talk the UK would bring negative rates?) The BOE has a targeted £ 875bn bond buying program, which it was supposed to achieve at the end of 2021. Do not slow down the current rate, or do not decrease, they will reach this limit sooner than expected. Of course, they can always increase the amount, as they have done twice before.

The coronavirus is still here

Although he talks about life after the coronavirus, there are still countries that are in the throes of it. India is currently the one suffering the most, with 300,000 to 400,000 new cases per day! The world is rushing to their aid to try to vaccinate as many people as possible. Japan also has prefectures under a state of emergency until mid-May, including Tokyo, which is expected to host the Summer Olympics in July.

Earnings

Whoa! What a past week for the winnings! The big tech companies blew up earnings estimates, joining the banks with far better than expected results. As mentioned above, around 1,450 companies are reporting profit this week. However, none should be as dramatic as we saw last week. Traders will be interested in LYFT and UBER, especially to see if they respond to the Biden administration’s comments that “construction workers should be classified as employees.” Other notable gains this week are: PFE, LYFT, GM, UBER, PYPL, MRNA, SQ, NTDOY, DKNG

Economic data

Along with central bank activity this week, the global manufacturing, services and composite PMI finals will be released. However, all eyes will be on employment data, as New Zealand, the United States and Canada are all reporting this week. Other important economic data are as follows:

Monday

  • UK, China, Japan: vacation
  • Global Manufacturing PMIs Final (APR)
  • Germany: Retail sales (MAR)
  • United States: Construction expenditure (MAR)
  • United States: ISM Manufacturing PMI (APR)
  • United States: Speech by Fed Chairman Powell

Tuesday

  • Japan, China: vacation
  • Australia: Trade balance (MAR)
  • China: Caixin Manufacturing PMI (APR)
  • Australia: RBA Interest Rate Decision
  • UK: Manufacturing PMI Final (APR)
  • Canada: Trade balance (MAR)
  • Canada: Building permit (MAR)
  • United States: Trade balance (MAR)
  • United States: Factory Orders (MAR)

Wednesday

  • Global: Final Composite Services and PMI (APR)
  • New Zealand: evolution of employment (Q1)
  • Australia: Building permit (MAR)
  • Australia: RBA Map Pack
  • EU: PPI (MAR)
  • United States: ADP Employment Change (APR)
  • United States: ISM Non-Manufacturing PMI (APR)
  • EU: speech on the path of the ECB
  • Canada: Speech by Governor Macklem of the BOC
  • Stocks of crude

Thursday

  • Australia: Speech by the RBA Debelle
  • New Zealand: Building permit (MAR)
  • Japan: minutes of the BoJ’s monetary policy meeting
  • New Zealand: ANZ Business Confidence Prel (MAI)
  • China: Caixin Services PMI (APR)
  • Germany: factory orders (MAR)
  • EU: PMI Construction (APR)
  • UK: PMI Final Services (APR)
  • EU: Retail sales (MAR)
  • Turkey: Decision on CBRT interest rates
  • United Kingdom: BOE decision on interest rates
  • United States: Prelude to Unit Labor Costs (Q1)
  • United States: Prelude to Non-Farm Productivity (Q1)

Friday

  • Australia: RBA statement on monetary policy
  • China: Trade balance (APR)
  • New Zealand: Business Inflation Expectations (Q2)
  • Germany: Trade balance (MAR)
  • Germany: Industrial production (MAR)
  • United Kingdom: Construction PMI (APR)
  • EU: ECB: speech by President Lagarde
  • Canada: Job Change (APR)
  • United States: Non-Farm Payroll (APR)
  • Canada: Ivey PMI (APR)

Chart of the week: daily EUR / USD

Source: Tradingview, FOREX.com

EUR / USD has had 2 one-way trades since February 25e. The pair began to fall in earnest after the failed 7-year US Note auction, and US yields and the DXY bid. The price went from 1.2183 to February 26e until 1.1704 on March 31st, which was not only the end of the month, but also the end of the first trimester. EUR / USD started rising from there and completely reversed course in April, peaking on April 29.e from 1.2148, only a few pips before the February close. Price failed just above the 61.8% Fibonacci retracement level on January 6e highs as of March 31st low, near 1.2100. On Friday, the last trading day in April, EUR / USD sold (probably on profit taking) near 1.2021 (see highlighted area). Horizontal resistance is at April 29e lows near 1.2120 and then same day highs at 1.2150. Just above there is the neckline of a previous head and shoulders reversed at 1.2190. Horizontal support is at 1.1980 / 90 which is also the 38.2% Fibonacci retracement of March 31st lowest as of April 29e Tops. Below is the 50% retracement level at 1.1930, then the previous support near 1.1860.

Over the past 6 months we have seen a lot of money come in on the first trading day of the month and buy stocks. We may see more of them on Monday. However, the focus will be on the BOE and employment data for the United States and Canada later in the week. The BOE may talk about tapering, as the Fed says it is in standby mode for a while, regardless of Friday’s NFP print.

Have a great week and remember to always wash your hands!