Market sentiment: RiskOn 28 days
Recap of the past week:
The past week was marked by the Federal Reserve’s interest rates decision and Jerome Powell’s subsequent press conference. As expected, the Fed did not change the rates. However, it was the following press conference that caused a greater stir. To the markets’ great surprise, Jerome Powell delivered a very dovish speech. He calmed the markets after several months of non-declining inflation, described the development as a seasonal fluctuation, and shifted all hopes to the next release of the US CPI in April. The markets took this very positively, and market sentiment rose to this year’s highs.
Outlook for the following week:
We are facing a relatively calm week without major events. The main macro event of the week will be the US PCE data on Friday. But let’s go in order:
On Monday, during the Asian session, we only have the minutes from the Bank of Japan’s meeting, followed by Bostic’s speech from the Fed and new home sales.
On Tuesday, we’ll see Australian Consumer Confidence in Asia. In Europe then German Consumer Confidence. In the US, we’ll get the closely watched Durable Goods Order, Housing Price Index, Consumer Confidence, and the Richmond/Dallas Fed Manufacturing Index. The day ends with the US5Y debt auction.
On Wednesday we’ll kick off with Australian inflation. In the EU, Spanish inflation, Business Climate, Consumer Confidence, and Economic Sentiment Indicator. During the US session, it will all be about the US7Y debt auction.
On Thursday, we will get Retail Sales in Asia. Furthermore, in the EU, Retail Sales in Germany, GDP in the UK, and German Unemployment. The US will be more eventful. We’ll receive the weekly labour market overview, Q4 GDP update, Personal Consumption Expenditures, the closely monitored Chicago Purchasing Managers’ Index, Michigan Consumer Sentiment Index, and Pending Home Sales.
On Friday, the main macro day of the week, we start in Asia with Japanese data: CPI, unemployment, retail sales, and Industrial Production. In the EU, only French and Italian inflation is worth mentioning. In the US, the highly anticipated PCE index. A slight decrease is expected on a month-to-month basis and stagnation on a year-to-year basis. These data itself again have the potential to impact market sentiment. If the PCE grows like the CPI, the market will certainly not perceive it positively. However, Jerome Powell’s statement from last week will still have an effect on the market. In case of a larger decrease, the market might start betting on a May CUT from the Fed.
Long-term sentiment
The Moodix market sentiment indicator significantly strengthened after Jerome Powell’s dovish press conference and reached strong levels. As we will be waiting for Friday’s data throughout the week, we can expect sideways trading. Of course, unless we receive anything new/strong that would broadly influence the current sentiment. Trading systems will continue to look for long trades.
Good luck! Team moodix!