Discounts only in September? What will the week bring?

The key event of the past week for financial market participants was the Friday publication of the NFP report. The strong employment change reading in the United States surprised investors and led to the postponement of the forecast of the first Fed interest rate cut to September. In turn, rising oil prices and incoming data from the American economy increase the probability of a return of inflation in the USA. Will we really have to wait until September for the reductions?

Inflation in the USA is relatively low 

Friday's NFP report was another publication that confirmed the strong labor market in the US in recent months. Employment growth in March by 303. While that alone was reason enough to change the Fed's future monetary policy forecasts, it is continuing wage pressure that is having a greater influence on Reserve policymakers at this point. Inflation in the US remains relatively low – at this point. The current wage dynamics combined with the rising price of crude oil, which in the case of WTI is heading towards USD 90 per barrel, raises questions about the possibility of a return to higher price dynamics in the USA.

However, apart from the NFP, last week investors' attention was also paid to the American ISM indices. The ISM industrial index returns above 50 points. initially reduced expectations for cuts. However, Wednesday's ISM services release clearly disappointed the market, restoring some hopes for Fed easing this year. Neel Kashkari of the Minneapolis Fed points to "sticky inflation" that could prompt Reserve members to keep interest rates at current levels until the end of this year. How might such a scenario affect the valuation of US stock indices?

In today's webinar:

• Does the labor market offer no chance for reductions?
• Will energy prices lead to a return of inflation?
• Cocoa – will this bubble burst?

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

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