US Retail Sales is the key economic data release this week, following the huge miss for NFP, the weaker USD, surging commodity prices and the re-emergence of inflation worries. US April CPI rose 0.8% and the core was up 0.9%, much hotter than expected, after respective gains of 0.6% and 0.3% in March.
The Market Week – May – Week 2
The focus of attention this week has been the huge miss for NFP, Equity markets rolling over and the continued weakness of the USD and rally in commodity prices. For the rest of the week Retail Sales is the key economic release still to come.
Unemployment remains stubbornly high globally, and the shock miss for NFP (226,000 vs 980,000) and rise in the unemployment rate to 6.1% continues to show the vulnerability of the recovery. However, last week’s US unemployment claims beat expectations again and broke under 500,000, for the first time in 14 months. This week consensus is for another move lower to 488,000.
The vaccine rollouts continue to drive sentiment, but the virus variants remain significant. The US and UK lead the high-income countries’ rollouts, and the EU and Japan are starting to gain momentum, as lockdowns ease. However, Brazil and particularly India remain very significant infection hotspots.
This week FX volatility continued as the USD moved to new 8-week lows before a slight reprieve. The USDIndex fell below 90.00 and is now struggling at 90.25. EURUSD moved to test over 1.2180, USDJPY remains capped by 109.00 and Cable rallied significantly to 1.4160 highs as local election results supported the Johnson government and cooled the risk of Scottish independence.
Global stock markets retraced from all-time highs as inflation fears once again arose and the strong Q1 Earnings Season began to be discounted. The USA500 has lost over 100 points from Friday’s close over 4,220 and tested the 20-day moving average at 4,100.
The Gold price finally broke the 200-day moving average at $1790 this week and moved significantly higher to $1845. Palladium and Iron Ore hit all-time highs and Copper touched 10-year highs as the commodity rally continues, helped by the weakening USD.
Bitcoin had a less volatile week, capped by key resistance at $58,000, while Ethereum hit another new all-time high over $4,250 having started the month at $2,750 and struggled to break $1,800 in March.
USOil prices have held over $65.00 a barrel this week having tested a 2-month high last week, buoyed by the wider commodity rally and weaker USD, but concerns over inflation and the global recovery are headwinds.
The yield on the US 10-Year Treasury Note holds above the psychological 1.50% level and is back over the key support of 1.60%, trading as high as 1.63% this week with a new auction due later today.
Click here to access our Economic Calendar
Stuart Cowell
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
