Highlights of the coming week
The Fed's soft tone of statements limits investors' interest in the dollar, providing an opportunity for its main competitors to grow. Strong macroeconomic statistics from the EU and the US only increase risk appetite. But the market situation may change dramatically if investors again bet on an earlier tightening of monetary policy by the Fed. In March, speculation on this topic led to a significant increase in the yield of American trigeris and a strengthening of the dollar.
In their speeches, Fed representatives have repeatedly stated that the main guidelines for monetary policy decisions are data on inflation and labor market dynamics.
Last week, US Treasury Secretary Janet Yellen spoke out, saying that overheating the economy could force Fedrezera to begin tightening monetary policy. Subsequently, she said that she saw no signs of a significant increase in inflation and did not predict a change in rates. But the market took note of the information and in the future will closely monitor key economic indicators.
In this context, the April CPI data published on Wednesday will be very important for the market. A significant increase in the consumer price index may provoke strong fluctuations in the market, which should be taken into account when making trade decisions in the coming week.
UK - preliminary GDP data for Q1
Last week, the Bank of England adjusted its forecast for GDP growth for 2021. The regulator expects growth at 7.5% against the previous forecast of 5.0%. On Wednesday, May 12, preliminary GDP data for the 1st quarter will be published in the UK, which could put pressure on the British currency.
In the 1st quarter of 2020, the COVID-19 pandemic has not yet reached foggy Albion. The economy functioned normally. In the 1st quarter of 2021, quarantine restrictions were a significant factor in containing the economy. Therefore, as part of the preliminary forecast, experts expect an annual GDP reduction of 8.1%. The projected quarterly decline is -1.8%.
USA - CPI data for April
Over the past two months, speculation on the issue of earlier curtailment of stimulus measures by the Fed has not subsided in the market. Many traders are confident that large-scale stimulus measures from the Fed and the government will accelerate inflation. In this situation, the regulator will be forced to intervene in the situation in order to keep inflation indicators in the range of 2-3%.
Against this background, the CPI report could be a key event of the upcoming trading week. Stronger inflation data may provoke a new increase in speculation about tightening monetary policy, even despite the soft tone of statements from the Fed.
U.S. - April Retail Sales Report
Retail sales data is an important indicator of consumer spending and the development of the economy as a whole. Recently, there is growing confidence in the market that the US economy will show a high recovery rate this year, especially in the 2nd half of the year. Therefore, it is important that investors' expectations are confirmed by real macroeconomic statistics. A weak retail sales report could undermine market confidence in the ability of the American economy to show stable and confident growth.