- U.S. CPI will be the main driver of the week
- The Fed relies on it for its rate planning
The market started the week lower. Friday’s macro indicators on nonfarm payrolls and U.S. jobs had an impact.
They showed that jobs and wages continue to grow. It reduced the fear of recession and strengthened the dollar.
And as we remember, a strong dollar is a weak bitcoin. You can read the detailed results of last week’s macro week in our story.
The market is also panicking on the news of possible mining taxes in the US. After all, high taxes will make bitcoin mining more expensive.
The main topic that could shake up the market in the coming week, of course, will be inflation data from the U.S. and trade data from China.
The Monday. U.S. Bankers Poll
Today at 9 p.m. Kiev time, the U.S. will release a survey of Federal Reserve loan officers. It covers 80 major domestic banks and 24 branches and agencies of foreign banks in the United States.
Questions include changes in bank lending standards and conditions, as well as the business situation and overall demand for credit among the public.
It also often includes questions on one or two other related topics as needed. It’s especially important to monitor sentiment in the banking industry, especially at regional U.S. institutions..
JPMorgan Chase raised its outlook on three regional banks (Western Alliance, Zions and Comerica Inc.), saying their stock prices were “significantly mispriced.”.
On this news, PacWest Bancorp’s share price rebounded 81% on Friday after a previous strong drop. So a fresh report will help clarify things.
Other Monday metrics: Bank of Japan meeting minutes, Sentix (Eurozone business climate) index, Australian business climate index.
Tuesday. China trade reports
We are not expecting any important events tomorrow. But for an overall picture, it is useful to check the latest data on China’s trade balance (imports, exports).
Their exports are expected to slow again sharply after their March surge (from 14.8% to 8%). There will also be a speech Tuesday by John C.. Williams at the New York Fed.
Wednesday. U.S. CPI
May 10 U.S. inflation data for April will be released. Economists forecast baseline CPI (excluding food and fuel) at 5.5%. And overall inflation at 5% year-over-year.
If the data is this or lower, it would mean inflation is easing but still persisting. This means that the Fed may pause its rate hike in June.
So stock and cryptocurrency markets should respond with growth. Given last week’s good U.S. labor market data, this could be interpreted as another sign of economic stabilization.
Higher inflation would be a harbinger that the Fed will keep interest rates high longer. This will create additional challenges for the market and may cause BTC to depreciate temporarily.
Other reports Wednesday: credit and money supply data in China, inflation data in Germany, mortgage applications in the United States.
Thursday. China Inflation and U.S. PPI
The U.S. will present the current producer price indexes (PPI) for April at 2:30 p.m. Kiev time.
Analists expect significant growth to 0.5% (previous metric was -0.3%). This means that product prices, which have been gradually declining recently, will rise again significantly.
The last time producer prices rose so sharply was in January. If the PPI rises as experts expect, the dollar index could rise and negatively impact the stock market and cryptocurrencies.
If the producer price indexes fall below experts’ estimates, it would weaken the dollar and strengthen bitcoin.
China is to release fresh inflation figures May 11. Last week’s data showed that manufacturing activity in the Celestial Empire unexpectedly decreased in April.
This reinforces the need for the authorities to stimulate the economy. Especially against the backdrop of depressed global demand for goods and problems in the real estate sector.
So, if inflation is higher than forecast (1%), it could force the People’s Bank of China to raise rates, which it has not done so far. This will weaken the dollar and is good for cryptocurrencies in the long run.
Other events on Thursday: the minutes and the decision of the Bank of England (a 0.25% rate hike is expected) and a speech by Fed member Christopher Waller.
Friday. U.S. Consumer Sentiment
May 12 market participants will read preliminary Sentiment/Inflation Expectations reports from the University of Michigan. They reflect the level of consumer optimism about U.S. economic development.
In the previous April release, household confidence fell significantly to 60.5. For May, experts predict a figure of 59.8.
This could indicate an economic downturn in the coming months. However, recent strong labor market data may come as a surprise and lift the sentiment index.
Also on Friday, the Consumer Confidence Index will be released. It is expected to fall to 63.0 (previous reading was 63.5).
If the decline in consumer confidence is confirmed, or even lower, the initial reaction could be price consolidation in the markets. That includes a downturn in the crypto market.
If private households remain confident about economic developments, it will again bolster the resilience of the first four trading months.
Other metrics on Friday include PMIs from Australia, inflation data from India, UK GDP, inflation data from France and Spain.