ECB meeting and CPI in the US and Europe
َAfter the second month of missing the employment expectations in the United States, now eyes will turn to CPI data in the US and ECB meeting in Europe. The market still is worried about inflation fate; however, FOMC members still believe that prices will decrease in the last quarter of the year, so there is nothing to worry about. Let`s take a quick look at the most important events of the week ahead.
Chinese CPI, Wednesday
China`s well-going economic recovery seems even much better than earlier expectations, as a critical manufacturing sentiment measure improves. Benign growth of Chinese inflation, still much less than 2%, growing around 1%, confirming that POBC`s policies have been fruitful. Better recovery in the world`s largest factory still must be supportive for the Oil market. Any number above $66 can help the market bulls` positive sentiment.
European Central bank meets Thursday.
The ECB meets on Thursday to decide about monthly PEPP purchases amount as well as other monetary policies. While inflation risk in Europe is not as high as in the US, some Hawkish comments from several ECB members highlight the possibility of earlier tapering of the PEPP purchasing plan. Anyway, we are not expecting any changes, and ECB will likely hold its current policies and interest rates. Euro still trading in a range against USD, despite the Friday decline. ECB holding position must help the Euro to stay still stronger.
Again the United States and the Inflation threat! - Thursday
The market participant is now more cautious than before, especially after US CPI Sharp jump to 4.2%, the highest level since September 2008, with a 3% rise in core prices. That`s why these numbers are now getting more interested since it can change the FED to begin lowering stimulus earlier than plan. Despite the missing estimates, increasing jobs, especially with a 0.5% increase in average earnings, increase the risk of longer-term high inflation. After New record high in May, Dow Jones is still trading in a clear positive area. Any number above 34,000 dollars with a lower increase of inflation can still support the DJI uptrend. However, breaching under 34K with higher inflation can send it much deeper levels.
UK GDP, Manufacturing and Industrial numbers, Friday.
Stronger than expectations PMI data of April, telling us that we have to be optimistic that April GDP will likely see another monthly expansion. On the other hand, In march, both Manufacturing and Industrial productions, raised respectively by 2.1% and 1.8%. For April, we are also expecting more gain, as another round of relaxation of restrictions announced in April, which is supposed to help the more progress. Footsie back in a clear uptrend, and these expected positive data also must support the market bulls, incredibly as long as it is trading above the 50-day moving average at 7,000.
