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Critical new week for the sterling and UKX
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Loading...A quick read at the economic data for the new week and it is crystal clear that it will be very busy for the UK and the pound. Wednesday we expect CPI data in the country, followed by retail sales and an inflation report on Thursday. Inflation is directly related to Bank of England's decision on interest rates, and retail sales are a good measure of the purchasing power of the population. Things are not over yet, as Friday is the day on which Gross Domestic Product will be released for the first quarter of 2018. In the first quarter, the UK economy has seen anemic growth, but a major measure of well-being, shows that de facto the Brits are actually impoverished. Gross domestic product per capita fell for the first time in two years as the population grew faster than production. All this, coupled with the disappointing economic data over the last few weeks, was a good reason for BoE not to risk overheating with an increase in interest rates. Of over 90% chance of hike during the last meeting, chances eventually fell to 10%. There was no change as expected, but Mark Carney's tone signals that the bank is still planning to act and tighten its monetary policy. That's exactly why this data in the new week will be extremely interesting and will greatly affect the British currency. Investors will also focus on the Brexit talks, which start on Monday. They will have a direct effect on UKX movement. After a long lag in the global markets, stocks in the UK are moving to record levels amid a good performance of oil and weak pound. However, technical indicators raise a red flag for likely overheating, according to Bloomberg Intelligence. RSI is at critical levels of a redeemed market, with the picture looking more alert than the January levels.
Regarding U.S. stocks, Instead of talk about stocks bottoming, there's more chatter recently about new highs, as small caps flirt with their former highs and money is jumping in to tech after this spring's washout. "I think the incremental positive is we broke the string of lower highs that's been in place since January. Our take is the correction that began in January is coming to an end," said Ari Wald, technical analyst with Oppenheimer. A number of analysts say ignoring the "sell in May" phenomena this year should be a good thing. "I think you're seeing leadership reassert. Twenty-five percent of the market cap — tech — is now doing better. The fact we've seen small-cap outperformance is reflective of a market that does seemingly want to take on some risk," said Keith Parker, chief U.S. equity strategist with UBS. Parker also said the market stands to gain going into the summer simply on the sheer power of corporate buybacks. Buyback announcements are up 80 percent this year, and the actual buybacks are up about 50 percent, according to UBS. Corporations should be buying stock back for the next few weeks until the quiet period ahead of earnings in June, he said. The market is not without risks, and those things that have been worrying it — trade wars, higher interest rates, geopolitical tensions — have not gone away. Oil prices could become a brake on market gains at some point, but so far stocks have taken a near four-year high in oil prices in stride. But if Middle East tensions set off an oil price spike, that would be a worry for stocks. Analysts say the fears about trade wars, however, seem to be fading, in part because it appears there will be a new NAFTA agreement. Also, President Donald Trump appears to have eased his stance toward China, after his weekend tweet on ZTE, and there are now signs the two countries are moving toward a deal that could give the company a reprieve from U.S. sanctions.
The important economic news for the new week 21.05 - 25.05.2018
Monday
01:45 New Zealand - Retail Sales
02:50 Japan - Trade Balance
Tentative USA - OPEC Meeting
Tuesday
15:30 Canada - Wholesale Sales
17:30 USA - API Weekly Crude Oil Stock
Wednesday
09:00 Germany - GDP
10:30 Germany - Manufacturing PMI
11:30 UK - CPI
17:00 USA - New Home Sales
17:30 USA - Crude Oil Inventories
21:00 USA - FOMC Meeting Minutes
Thursday
01:45 New Zealand - Trade Balance
11:30 UK - Retail Sales
12:00 UK - Inflation Report Hearings
14:30 Europe - ECB Publishes Account of Monetary Policy Meeting
15:30 USA - Initial Jobless Claims
17:00 USA - Existing Home Sales
Friday
02:30 Japan - Tokyo Core CPI
11:00 Germany - Ifo Business Climate Index
11:30 UK - GDP
15:30 USA - Durable Goods Orders
16:00 USA - Fed Chair Powell Speaks
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