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Analysis

This weeks key events | 3 markets to watch this week 13th May 2024

BY Janne Muta

|May 13, 2024

The UK employment data is being released on Tuesday with analysts forecasting the rate staying at 4.2%. Therefore, should the actual number deviate strongly from the forecast we could see additional volatility in the GPBUSD.

February saw the unemployment rate rising to 4.2% from 3.9% in December. This increase surpassed market expectations of 4.0% taking the unemployment rate back to levels relatively close to the 2023 high (4.3%). The number of unemployed individuals surged by 85,000, totalling 1.44 million.

Simultaneously, average weekly earnings, inclusive of bonuses, grew modestly by 5.6% year-on-year to £677. This growth, consistent with previous periods, remains subdued but well above the long-term averages. Wage growth has been steady in the public sector but has decelerated in the private sector. However, adjusted for inflation, real wage growth remains modest posing challenges to private spending.

Once again, the most important macroeconomic numbers in terms of potential market movement come from the US. Powell’s speech together with inflation and retail sales data are likely to provide us with trading opportunities in the dollar-related markets on Tuesday and Wednesday. The Fed Funds Futures market expects no rate cuts before September while markets seem unsure about another rate cut in December. This led to directionless trading last week and traders are now hoping Powell’s speech together with the PPI and CPI numbers would provide further clues on the likely policy path.

Earlier, the Federal Reserve held rates steady at 5.25% to 5.5% with Chair Jerome Powell acknowledging stating that it will likely take longer than anticipated for the Fed to gain confidence that the economy is on a sustainable path toward 2% inflation.

No change is expected in the PPI for April. In March 2024, US producer prices saw a modest month-over-month increase of 0.2%, marking the smallest rise in three months and falling below the anticipated 0.3%. Annually, the Producer Price Index (PPI) escalated to 2.1%, the highest since April 2023.

Consensus expectation for the inflation data suggests we could see the monthly inflation rate coming in at 0.3% (vs. 0.4% prior) and the annual number is expected to be confirmed 0.1% lower at 3.4%. The monthly and annual core inflation are also predicted to slow down to 0.3% and 3.4% respectively.

On Thursday, Australia reports employment numbers. Analyst forecasts suggest the unemployment rate could move higher by 0.1% to 3.9% (3.8% prior). While the number is somewhat elevated relative to 2023 it is substantially lower than the long-term averages.

3 Markets to watch this week

GBPAUD

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Last week the market paused after trading lower quite steeply for two weeks. Last week’s high at 1.9037 (aligns with the 23.6% retracement level) is the nearest major resistance level and the market remains bearish below it. Should GBP bulls fail to push the market above the level we could it trading down to 1.8900 (last week’s low) and then perhaps to 1.8820 in case of price breaking below last week’s low. Note however, that the narrow range weekly candle created last week could result in the market reversing the course. If there is a decisive close above the last week’s high a move to 1.9096 could be likely. Above the level, look for a move to 1.9146.


EURUSD

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Even though the price action also in the EURUSD last week was sluggish (formed a narrow range candle) the market remains mildly bullish as long as last week’s low (1.0724) isn’t violated decisively. The slow grind in the pair is due to the market trying to push above the 1.0791, a resistance level created in April. Above 1.0724 look for a move to 1.0820 and then perhaps to 1.0885 while below last week’s low we could see the market trading down to 1.0680. Below the 1.0680 level a drop down to 1.0650 might be in the cards.

Nasdaq

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Nasdaq has moved to levels where it might face supply after a strong up move. Friday’s exhaustion candle in the daily chart was an indication that demand might not anymore be greater than supply. The index is sensitive to interest rates and therefore US inflation data release could really move the market.

While the market is still technically in an uptrend the momentum loss candle created on Friday causes some concern. As always, there are two scenarios: Either the bullish trend remains intact or the market starts to break support levels which could lead to a deeper retracement. The nearest major support level is at 17,967 and the market remains in an uptrend above this level. Above this level we could see Nasdaq testing the nearest key resistance level at 18,340. Below 17,967 (if there is a decisive break below this level) the 17,800 level might come to play

This weeks high impact market events

The following economic events and data releases have the potential to cause considerable price movements, thereby offering you both opportunities and risks. Stay informed and leverage our economic calendar to access real-time data and analysis as these key events unfold.

All times are GMT +3

Monday May 13th

6:00 AM
NZD
Inflation Expectations q/q

Tuesday May 14th

9:00 AM
3:30 PM
5:00 PM
GBP
USD
USD
USD
Claimant Count Change
Core PPI m/m
PPI m/m
Fed Chair Powell Speaks

Wednesday May 15th

4:30 AM
3:30 PM
AUD
USD
USD
USD
USD
USD
USD
Wage Price Index q/q
Core CPI m/m
Core Retail Sales m/m
CPI m/m
CPI y/y
Empire State Manufacturing Index
Retail Sales m/m

Thursday May 16th

4:30 AM
3:30 PM
AUD
AUD
USD
Employment Change
Unemployment Rate
Unemployment Claims

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.