Macro Week Ahead: U.S. Inflation, Fed Chair Powell Speech, Chinese Economic Activity
Macro Week Ahead: U.S. Inflation, Fed Chair Powell Speech, Chinese Economic Activity
By:Ilya Spivak
Sentiment darkened last week as data undershot economists’ forecasts
- Stock markets are shuddering as consumer confidence data brings inflation red flag.
- U.S. CPI data and Fed Chair Powell speech come into focus as rate cut outlook evolves.
- Soft Chinese retail sales and industrial production data may bring fear of recession.
A quiet drift upward for most of the week seemed to hit a wall on Friday as U.S. consumer confidence data from the University of Michigan (UofM) spooked the markets. The data showed that sentiment darkened—undershooting economists’ forecasts by a wide margin—as the one-year inflation outlook jumped, as expected.
The UofM report signaled the Federal Reserve may be more reticent to cut interest rates this year than investors are hoping. The figures arrived just in time to set the stage for a busy week of releases shaping monetary policy expectations on the economic calendar in the days ahead.
Here are the macro waypoints likely to shape price action this week.
Federal Reserve Chair Powell speech
The U.S. central bank chief is scheduled to speak at the annual meeting of the Foreign Bankers’ Association in Amsterdam. Traders will be looking for any language signaling that worries about sticky inflation are undercutting the Fed’s confidence in delivering stimulus this year.
As it stands, the markets are pricing in 34 basis points (bps) in cuts this year. That amounts to one standard-sized 25bps rate cut and a 36% probability of a second one.
U.S. consumer price index (CPI) data
U.S. inflation is expected to have cooled in April. The headline price growth rate is seen falling to 3.4% year-on-year, retreating from the six-month high of 3.5% set in March. The core measure excluding volatile food and energy prices edges down to 3.6%, the lowest in three years.
An upside surprise on the headline figure may be in the cards. Rising crude oil prices since the beginning of the year have entered the CPI calculation with about a one-month lag. The WTI benchmark slipped last month but the March rise is yet to be accounted for.
Another hotter-than-expected inflation number may spook stock markets as traders even if the core measure – the one most emphasized by Fed officials—mostly meets expectations. The markets’ elevated sensitivity to anything that might extend the “higher for longer” narrative on interest rates might trigger a broadly risk-off reaction.
China industrial production & retail sales data
Chinese economic activity figures are expected to show improvement in April, with retail sales and industrial production quickening from the previous month. Analytics from Citigroup suggest China’s economic data outcomes have been deteriorating relative to forecasts recently, setting the stage for disappointment.
Soft results might revive worries about a global economic downturn, especially in the wake of a month of softening U.S. data outcomes. Stock markets might wobble if talk of recession re-emerges.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.