During the week ahead the market is likely to look towards a number of key market themes and events which have the potential to indicate financial market moves.
The economic calendar is jammed packed with important events and releases this week. The RBA, FED and ECB rate decision headlines, alongside the release of the Non-farm payrolls job report and the ISM manufacturing report.
FOMC Rate Decision
Most economists agree that the Fed is likely to raise interest rates by a further 25 basis points on Wednesday, though Fed chair Jay Powell will probably want to keep his options open.
The key factor to watch will be how many rate hikes are left before the Fed feels that they are no long necessary to fight inflationary pressures.
Should we see the Fed giving a node to more than 2 more rate hikes in the vicinity of 25 basis points then the US dollar is likely to move higher and stocks should falter.
Last month he US economy added 236,000 jobs in March, in line with economists’ expectations. The unemployment rate fell to 3.5%, down from 3.6% in February, while the participation rate rose to 62.6%, up from 62.5% in February.
Current data from most analysts suggest that the United States economy created 180,000 jobs in April. This would be a very low number and would likely trigger a bearish reaction in the market.
It may be difficult for the Fed to warrant raising rates if the headline number continues to creep lower or close to the neutral point.
EU CPI + ECB interest rate decision
This week flash consumer price index (CPI) reading for April could help determine whether European policymakers decide to raise interest rates by 25 or 50 basis points.
Currently, the risk is that the ECB could start to become more dovish on rate hikes given that producer prices have fallen, and month-on-month readings are now coming in negative.