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Analysis

Weekly key events | Market opportunities in focus 7th May 2024

BY Janne Muta

|May 7, 2024

This week’s highlights for GBP traders are the Bank of England’s decision and the Q1 GDP on Thursday and Friday. While the BOE is expected to hold the rates unchanged at 5.25%, GDP could rebound from the prior quarter.

Analysts are cautiously optimistic about the monthly growth with a forecast of 0.1%. This figure aligns with the previous month's growth, suggesting a stabilisation in the economy. For the quarterly outlook, expectations are for a rebound with a preliminary GDP growth rate of 0.4% for Q1, contrasting starkly with the previous quarter's contraction of 0.3%.

All in all, the UK has faced challenges such as persistent negative GDP growth rates, a shrinking manufacturing sector, and high inflation, contributing to economic uncertainty.

The upcoming Canadian data for next week will include the Ivey PMI and key employment indicators. The Ivey PMI is forecasted to increase slightly to 58.1 from a previous value of 57.5, indicating a modest expansion in the business environment. This uptick suggests a continuing resilience in the Canadian economy, albeit at a pace that warrants close monitoring due to its proximity to the threshold that delineates expansion from contraction.

Moreover, the employment data is expected to show a significant shift. The forecast suggests an employment change of 20.9K, contrasting sharply with the previous month’s drop of 2.2K. Additionally, the unemployment rate is expected to rise slightly from 6.1% to 6.2%.

This week, the US reports docket is on the lighter side. The upcoming data includes the results of the weekly unemployment claims and the University of Michigan (UoM) Consumer Sentiment Index.

The weekly unemployment claims are forecasted to come in at 211K, slightly up from the previous 208K. This minor increase doesn’t however suggest labour market weakness as the level is well below the long-term averages. The upcoming Preliminary University of Michigan (UoM) Consumer Sentiment Index is the other focus point for traders this week. The forecast indicates a slight decline in consumer sentiment to 76.3 from the previous 77.2. In addition to consumer sentiment, the UoM will also release its Preliminary Inflation Expectations (previous 3.2%). This figure is critical as it provides insights into consumers' expectations about inflation, which can influence their spending and saving behaviour.

The US economy has demonstrated resilience this year with robust GDP growth and a strong job market. Unemployment rates have remained low, reflecting a buoyant economic environment driven by consumer spending and business investment. Despite the Federal Reserve's tighter than expected monetary policy the economy has been expanding. Key sectors such as technology and manufacturing showed notable growth, contributing to an increase in industrial production.

3 Markets to watch this week

GBPUSD

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Since the end of March GBP has been weaker than the USD, reflecting US economic strength while the UK has faced challenges. Over the last two weeks we have seen a contra-trend rally in the market but the lower daily high created yesterday suggests the USD could be strengthening in the coming days. If the market breaks below the 1.2529 support, we might see the market trading down to 1.2475 and then possibly to 1.2430. Note that the SMA(50) and the 50% retracement level are closely aligned with this level. Alternatively, above the 1.2529 support level a move to 1.2580 – 1.2600 range could be likely.

USDCAD

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USDCAD traded down to a key support level (1.3613) and attracted institutional buyers on Friday. On Monday the market created a higher low (1.3648) suggesting the dollar bulls could be gaining ground. If the bulls defend the levels above the 1.3648 level and are able to decisively push the market beyond Monday’s high at 1.3697 we might see USDCAD trading to 1.3760. Alternatively, below 1.3613, the market could trade down to 1.3560.

Dow Jones

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Reflecting the strong US economy, the Dow Jones Industrial Average index has completed a bullish reversal in the weekly and daily charts. The market has broken above the weekly reversal candle and is now rallying higher after a creation of a higher swing low at 37,700. The market is nearing a key resistance level at 39,027 which is relatively close to the 61.8% Fibonacci level. After the bullish breakout last week, we might well see the market pushing beyond the 39,027 resistance level reaching the measured move target at 39,426. This target is based on the width of the reversal formation that the market created after the April low (37,237).

However, a pullback from this key resistance level is a possibility. While it is impossible to know how deep the possible retracement may be, the nearest key support level at 38,575 could in such a case attract buyers.

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

Tuesday May 7th

Time
7:30 AM
Currency
AUD
AUD
AUD
Cash Rate
RBA Monetary Policy Statement
RBA Rate Statement

Thursday May 9th

Time
2:00 PM
2:30 PM
3:30 PM
Currency
GBP
GBP
GBP
GBP
GBP
USD
BOE Monetary Policy Report
Monetary Policy Summary
MPC Official Bank Rate Votes
Official Bank Rate
BOE Gov Bailey Speaks
Unemployment Claims

Friday May 10th

Time
9:00 AM
3:30 PM
5:00 PM
Currency
GBP
CAD
CAD
USD
GDP m/m
Employment Change
Unemployment Rate
Prelim UoM Consumer Sentiment
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While research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.

TIO Markets UK Limited is a company registered in England and Wales under company number 06592025 and is authorised and regulated by the Financial Conduct Authority FRN: 488900

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.

DISCLAIMER: TIO Markets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

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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.