Markets dormant awaiting FED and ECB decisions

Last week, despite the abundant macro calendar, contained positions of the second caliber, which did not significantly affect the volatility of the market. Dax, after testing the level of 15900 points three times, finally capitulated and slightly moved away from this level. SP500 failed to break the resistance at 4190 points. and in the short term, the chart signals declines.

EUR / USD it is still in narrow consolidation. So far, the break above 1,1 was only a temporary incident, but the lack of a decisive correction suggests that we are facing another attack of this level and an attempt to break higher.

A disappointment in the US

The United States showed worse regional data. The Philadelphia Fed index was very disappointing and the US Conference Board index of leading economic indicators performed very poorly. We have received further signals of a cooling of the labor market. There was once again an increase (albeit moderate) in the number of applications for unemployment benefits.

Europe in April did well in the service sector, which is still benefiting from the normalization of demand after the end of pandemic restrictions. However, the impending recession in the manufacturing sector will negatively affect them in the long run. The manufacturing PMI surprised again negatively.

In the first quarter, China recorded the highest rate of economic growth in a year (4,5 percent). This can certainly raise hopes for an increase in global demand, but in the long run it may strengthen global inflation. Investments in fixed assets on an annual basis were weaker than expected and increased by 5,1 percent. compared to last year, as investment in infrastructure and manufacturing slowed down. Real estate investment continued to decline. The strong performance in Q1 largely reflects the swell in demand driven by China's reopening.

A turnaround in the monetary policy of the Bank of Japan?

The market is waiting for the Fed's decisions and EBCwhich are scheduled for early May. We are currently in the early stages of quarterly results for Wall Street companies. The banks surprised on the plus side by confirming that the problems of Silicon Valley Bank and other regional entities did not spread widely across the sector. Tesla surprised with a worse result, to which investors reacted with a moderate sell-off.

This week's GDP data (Thursday) for Q1 will give some indication that how strong is the economic downturn in the US. Certainly, one should also look towards the Fed's preferred PCE core inflation measure, which will be published on Friday, May 28. In turn, Europe will release preliminary data on CPI in April. We are in a blackout period (in the US it lasts from Saturday, in Europe from Thursday), which means that we will not receive any guidance from central bank decision makers.

The decision on interest rates in Japan promises to be interesting - the first of the new president of the BoJ. Inflation in the country of the rising sun does not let up (although compared to other parts of the world it is still low). The market is quietly hoping for a turnaround in the Asian bank's monetary policy.

Source: Łukasz Zembik, OANDA TMS Brokers