×

Watch Reborn a Trader

CFDs and Spread Bets are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.88% of retail investor accounts lose money when trading CFDs and Spread Bets with this provider. You should consider whether you understand how CFDs and Spread Bets work and whether you can afford to take the high risk of losing your money. Please seek independent advice if necessary.

Market news

Daily finance news update

OPEN LIVE ACCOUNT

Week Ahead: Inflation data in focus as dollar remains king

May 17,2022 11:12:36

Risk off sentiment has dominated global markets in recent weeks. Headlines around some of the more speculative areas of the market like digital coins, have abounded in this environment. The Fed tightening story has much to do with this as the liquidity tap is constricted and policymakers rush to reinforce the central bank’s inflation-fighting credibility. If recession concerns grow louder, they may transcend inflation worries. This means the bid in the dollar could weaken broadly as the 3.20% 10-year US Treasury yield (and 105 in DXY) becomes strong resistance to more upside.  

We kick off the week with activity data from China. The most recent PMIs have been very downbeat, reflecting the stringent lockdown restrictions in Shanghai and other major cities. Going forward, we will keep a close eye on the PBoC as potential rate cuts get announced to support economic activity. This should boost credit growth and some of the China-linked commodity currencies like AUD and NZD which have been highly correlated to the yuan recently.

Elsewhere sees the usual mid-month cluster of UK figures. Inflation is the major release with expectations of a double-digit headline print later this year. The BoE is already anticipating this in its forecasts. Another fall in the unemployment rate next week is likely to highlight the tightness of the jobs market. This adds to wage and price pressures, though the MPC seems more preoccupied by falling growth.

The beleaguered pound (and the euro too) are eyeing up major levels. The weak undertone in GBP/USD could push the major down to 1.20, after a fourth consecutive week of declines. Long term retracement support sits at 1.2017. EUR dropped through major support at 1.05 with all eyes on 1.0341, the January 2017 low. Both major currencies are deeply oversold on medium and long-term charts so due a retrace.

Major risk events of the week

16 May 2022, Monday:

China Retail Sales, Fixed Asset Investment: Retail sales are expected to contract at an even faster pace than the 3.5% drop in March. Investment will take up some slack but is still forecast to slow to just above 5%. This data will be key in gauging how much impact the omicron flare-ups have had on the economy as major cities went into lockdown.

17 May, Tuesday:

UK CPI: Analysts expect the March jobless rate to remain at 3.8%, its lowest in 47 years. Earnings growth is forecast to strengthen further to 4.1% from 4% in February. The labour market is very tight, but there are some signs of waning momentum like slowing growth in vacancies and employment.

US Retail Sales: Analysts see a likely rise in the headline figure to 1% from 0.7% in March. Firmer auto sales and rising wages are expected to help activity. Cash savings during the pandemic are also set to keep spending relatively robust until inflation starts to slow.

18 May 2022, Wednesday:

UK CPI: Consensus is expecting a big jump in the headline print to 9.1% y/y from 7% in March. That was the highest print in three decades. April’s sharp rise mostly reflects the 54% increase in the regulated utility price cap. Core is seen advancing to 6.3% from 5.7% in March.

Canada CPI: Broad based price rises are expected to continue with a tight labour market driving wage inflation. The 6.7% March figure was well above estimates of 6.1% and was the twelfth straight month above the central bank’s 1% to 3% control range. The BoC is fully expected to hike rates by 50bps at its next meeting as it continues its tightening cycle.

19 May 2022, Thursday:

Australia Jobs: April unemployment is forecast to dip for a third straight month and hit its lowest-ever rate at 3.9%. With regional surveys reporting higher wage growth, the wage price index is expected to come close to 3%. This is the RBA’s previous benchmark for “sustained” inflation. Sadly for the aussie, it’s the external picture which is driving price action and sentiment as the major battles with 0.70.

20 May 2022, Friday:

UK Retail Sales: Analysts expect a further contraction in April after sales tumbled by 1.4% in March. The 54% increase in the energy price cap and the National Insurance hike is likely to weigh on volumes. The inflationary surge is squeezing consumers’ real purchasing power.

Fast & easy account opening

  • Register

    Choose an account type and submit your application

  • Fund

    Fund your account using a wide range of funding methods.

  • Trade

    Access 1000+ CFD instruments across all asset classes on MT4