This week the market will once again be tested by a series of economic data and earnings reports, investors will focus on PMI data in Europe and the United States, the European Central Bank interest rate resolution, a series of large cyclical stock earnings reports, etc., while the Federal Reserve enters a period of silence before its meeting in late April, making final preparations for the rate meeting in two weeks. This makes the dollar may maintain the current downtrend.
Strategists at Holland International Group point out that this week’s light U.S. economic data and silent Fed could favor a continued benign market trend and a modestly weaker dollar.
①U.S. stocks welcome another heavy earnings report
After last week’s announcement of bank stock earnings generally exceeded expectations and drove U.S. stocks to record highs, the market will once again see a baptism of earnings this week, with IBM, Johnson & Johnson, Nifty, Intel, Johnson & Johnson, Procter & Gamble and other major companies set to announce their quarterly reports.
Lori Calvasina, head of U.S. equity strategy at Royal Bank of Canada, said investors need to pay close attention to the upcoming earnings reports, as rising commodity prices, supply chain issues and other cost factors may lead to profit pressure through the earnings report to reveal clues.
②The ECB is expected to stay put
At 19:45 on Thursday, the ECB will announce its interest rate resolution; at 20:30, President Lagarde will hold a press conference. DailyFX analyst Martin Essex expects the ECB to stay put this week, with Lagarde expected to maintain a dovish stance.
Lagarde warned at an event last Wednesday that the eurozone economy is still supported by the two “crutches” of monetary and fiscal stimulus, which cannot be withdrawn unless the economy fully recovers. A number of ECB policy makers have supported Lagarde, but the ECB management committee Nott and Holtzman have called for a reduction in the scale of bond purchases later this year, which indicates that there are differences within the ECB.
The risk at this meeting will therefore be that Lagarde is less dovish than expected, and the euro could move higher against the dollar if Lagarde shows any sign that she will retract her comments from last week.
Eurozone economist David Powell said the ECB’s press conference may provide hints for future discussions on the pace of bond purchases. Lagarde is likely to be non-committal on early bond purchases through the anti-epidemic emergency bond purchase program after the second quarter. The ECB is expected to scale back the pace of bond purchases in June unless interest rates face new upward pressure from overseas.
③The Bank of Canada is expected to start tightening monetary policy
On Wednesday (April 21) at 22:00, the Bank of Canada will announce its interest rate resolution; at 23:00, Bank of Canada Governor McCollum will hold a press conference to discuss the monetary policy report. Prior to that, on April 19, the Canadian government will announce its fiscal budget.
Some market analysts expect the Bank of Canada to start tightening monetary policy and announce plans to cut back on government bond purchases as the Canadian economic recovery performs strongly, surprising even the most optimistic analysts.
Credit Suisse said the week ahead is key, maintaining its forecast that the dollar will fall to 1.2260 against the Canadian dollar before the Canadian government announces its fiscal budget and the Bank of Canada announces its interest rate resolution. Credit Suisse sees limited risk to the current outlook for growth related to the new crown epidemic and the embargo, which is expected to be partially offset by the prospect of additional fiscal spending. In addition, it is expected that the Bank of Canada may announce a very gradual plan to reduce asset purchases, which is expected to have a positive impact on the Canadian dollar.
Bank of Canada Deputy Governor Gravelle also previously indicated that the Bank of Canada may provide ample housing market analysis in its April monetary policy report.
④ Leaders’ Climate Summit Held
U.S. President Joe Biden plans to hold a “Global Leaders Climate Summit” in Washington, D.C., on April 22, World Earth Day, by webcam, with the participation of leaders from many countries.
Sources familiar with the matter said the Biden administration plans to announce billions of dollars in aid to help developing countries combat global warming and adopt clean energy. Biden is also set to sign an executive order addressing the financial risks posed by climate change and pledging to cut U.S. greenhouse gas emissions in half by 2030 from 2005 levels.
⑤ April 19 will be a big day
Investors will be watching to see if the U.S. can deliver on Biden’s promise to make “all U.S. adults eligible for the new crown vaccine” on April 19, otherwise it could shake market confidence.
The CDC updated data over the weekend that 39 percent of the U.S. population has received at least one vaccination against Neocon. The Associated Press said that half of U.S. adults have received at least one dose of the vaccine.
As of April 17, more than 82 million people in the U.S. have received the new coronavirus vaccine, meaning they have received at least a single dose of the vaccine or have received one of the two doses.
In addition, more than 129 million people in the U.S. have received their first dose of the vaccine, meaning that it won’t be long before half of the U.S. population has some level of protection against the virus.
Notably, Fauci, director of the National Institute of Allergy and Infectious Diseases, has indicated that the Johnson vaccination may resume in some way by this Friday.
(6) Eurozone and U.S. Manufacturing PMI
On Friday (April 23), the preliminary April manufacturing and service PMIs for France, Germany, the Eurozone and the UK, as well as the preliminary April Markit manufacturing and service PMIs for the US, will be released.
Europe’s largest economy, Germany’s manufacturing sector may continue to rebound strongly, but the service sector expansion growth may lag, as the epidemic caused Germany to restart restrictions to suppress business activity.
Daniel Briesemann, an analyst at Commerzbank, said the U.S. economic data released last week was largely much better than the market expected, and market participants seem to believe that this time the Fed will not react to good data and will tolerate economic overheating, so there is no pressure on gold and silver, which might otherwise reduce the market demand for gold as a safe haven.
Lukman Otunuga, a research analyst at FOREX (FXTM), believes that if U.S. Treasury yields continue to fall, it could push gold prices to the $1,800 per ounce level, while at the same time, growing tensions between the U.S. and Russia could be the icing on the cake for gold bulls.
(7) Ethereum ETF Coming This Week
After the world’s first bitcoin ETF hit the market in mid-February, ethereum ETFs are coming this Tuesday (April 20).
Canadian regulators have approved three ethereum exchange-traded funds (ETFs), namely asset manager Purpose Investments’ ethereum ETF (ETHH), Evolve’s ethereum ETF (ETHR) and CI Global’s ethereum ETF (ETHX). All three ethereum ETFs will be listed on the Toronto Stock Exchange (TSX) this Tuesday.
Interestingly, both issuers are calling themselves “world premieres,” with Purpose Investment’s ETF claiming to be the world’s first physically-settled ethereum ETF and CI Global’s ETF claiming to be the world’s first ethereum ETF with the lowest management fees.
⑧ Two major events in the U.S. Senate
The U.S. Senate Appropriations Committee will hold a hearing on the infrastructure plan this Tuesday. Be on the lookout for news on the size of infrastructure and Biden’s tax hike. According to AXIOS website, Democrats close to the U.S. White House expect Biden to accept a 25% corporate tax rate instead of the previously proposed 28%.
Also, on Wednesday (April 21), the U.S. Senate Judiciary Committee will hold a hearing on the issue of monopolies in mobile app stores.
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