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Key events to watch in the week ahead


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The upcoming week could see less hawkish Fed comments as we head into the blackout period, but sentiments will remain highly sensitive to incoming economic data and key corporate earnings releases to drive market moves.

MarketsSource: Bloomberg
 
 
 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 20 January 2023 

This week’s overview

This week has presented a more risk-off tone in markets, with the VIX reclaiming back above its key 20 level as a sign of mounting market stress. Continued downside surprise in US inflation and deeper contraction in growth data have thus far failed to sway Federal Reserve (Fed) members in feeding markets with pivot hopes, with various Fed comments still guiding for a more hawkish rate path (above 5%) as compared to current market pricing. Perhaps the pocket of optimism is that we will see less of such comments as we head into the official Fed blackout period at the end of this week, but that will still leave sentiments highly sensitive to incoming economic data and key corporate earnings releases to drive market moves.

Here are some of the key events to watch next week:

 

25 January 2023 (Wednesday): Inflation figures from New Zealand, Australia and Singapore

Closer to the Asia region, inflation figures from New Zealand, Australia and Singapore will be due next week to provide further clues on central banks’ policies ahead. Coming off an upside surprise in Australia’s November monthly inflation, along with still-elevated reading of 7.3%, another 25 basis-point (bp) from the Reserve Bank of Australia (RBA) in February remains the consensus with a 62% probability being priced. That will, however, potentially mark the last rate hike from the central bank, with confirmation to be sought from the upcoming central bank’s guidance. On another front, Singapore’s inflation rate will also be due for release, with the core aspect still providing little conviction that a peak is in place. Past two months’ readings have hovered around 5.1%, just barely a tick lower from its high at 5.3%, potentially pointing to some pricing persistence.

 

25 January 2023 (Wednesday): Bank of Canada’s interest rate decision

Heading into the Bank of Canada’s (BoC) interest rate decision, market expectations have been somewhat split between a no-change (40.3%) and a 25 bp hike (59.7%), leaving the upcoming decision a potential close-call. Just this week, there are promising signs of moderating inflationary pressures but this will be pitted against still-elevated readings and a stronger-than-expected labour market, which leaves prospects of further tightening move on the table. Current market pricing suggests that an upcoming 25 bp hike will be the last tightening move, bringing a subsequent rate pause in sight and any confirmation from the central bank will be perceived as a dovish take. For now, the USD/CAD remains supported by an upward trendline, with a bullish crossover on moving average convergence/divergence (MACD). Any move above the 1.350 level of resistance will be on watch to pave the way higher towards the 1.370 level next.

 

USD/CADSource: IG charts

 

26 January 2023 (Thursday): Advance estimate for US Q4 GDP

Risk assets have been hammered this week, as significantly lower-than-expected economic data gave rise to mounting growth concerns, with the narrative seemingly shifted towards ‘bad news for the economy is bad news for the markets’. While the upcoming US quarter four (Q4) gross domestic product (GDP) data may be backward-looking, a more resilient number could be looked upon to provide more conviction of a potential ‘soft landing’ and room to avoid a recession ahead. Current expectations are for US Q4 GDP to come in at 2.8% quarter-on-quarter, down from the previous 3.2%.

 

27 January 2023 (Friday): US core Personal Consumption Expenditures price index

Being the Fed’s preferred inflation measure, the December number for US core Personal Consumption Expenditures (PCE) price index will be in focus to provide the last glimpse of pricing pressures before the next Federal Open Market Committee (FOMC) meeting (31 Jan – 1 Feb). Thus far, past few months of downside surprise in inflation have failed to sway Fed policymakers’ views of having a peak rate above 5%, with market participants looking for another lower-than-expected reading to support their less-hawkish pricing for Fed’s rate outlook. That said, market reaction to the moderating-inflation story has been more measured recently, seemingly with much already being priced after past two consecutive months of inflation downside surprise. It may now take a shift in tone from the Fed to drive a more sustained rally, which could still be unlikely to play out yet, with inflation more than two-fold above its target 2%.

 

23-27 January 2023: US big tech earnings release (Microsoft, Tesla)

Companies accounting for around 26% of S&P 500 market capitalisation will be releasing their earnings next week, which includes US indices’ heavyweights such as Microsoft and Tesla. Both companies are likely to see further earnings moderation from economic pressures, with Microsoft expected to face its weakest earnings growth since 2016 while latest vehicle delivery figures for Tesla suggests that it may fall short of its 50% growth target each year. With both valuation still trading at a premium above the broader market (S&P 500), failure to meet market expectations could call for further downward re-rating in share price. The Nasdaq 100 index has thus far failed to overcome a downward trendline resistance, which is key in pointing to a potential reversal in sentiments. On the downside, the 10,600 level will be on watch in marking multiple bottoms over the past quarter.

 

NasdaqSource: IG charts
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Week Ahead 23/1/23: US GDP; Tesla earnings

There is a fair bit of US data next week, most of which has the potential to move the markets. However, IG analyst, Axel Rudolph FSTA, picks out the S&P 500 in response to US GDP.

 Jeremy Naylor | Writer, London | Publication date: Friday 20 January 2023 

Earnings come in from many companies, particularly in the US where most of the large cap businesses are all sessions on the IG platform. Axel chooses Tesla, drilling down from the weekly chart.

(Partial video transcript)

23/01

Let's take a look now at the week ahead for the week starting monday the 23rd of January. We begin with the economic calendar on Monday where we start off with the consumer confidence flash data for the eurozone. Be interesting for a euro/dollar trade, as we look at the beginning of next week.

24/01

Let's take a look at what's happening on Tuesday. Overnight we get the NAB business confidence, the National Australia Bank issuing details of what's happening in Australia. We've recently seen an uptick in retail sales. This is going to show through in the business confidence area in Australia.

Meanwhile, german GfK consumer confidence comes out a little bit later on in the morning along with eurozone, UK, US and S&P global manufacturing services PMI flash data gives an insight into how the purchasing managers are feeling about the outlook for the various economies.

And the weekly American Petroleum Institute crude oil inventories.

25/01

Take a look at Wednesday the 25th, we get Australian fourth quarter trimmed mean CPI, a snapshot of inflation within the Australian economy.

And then the Ifo business climate from Germany later on. At 1:30 in the afternoon, the Bank of Canada comes through an interest rate decision and a full monetary policy report.

Then there's a weekly EIA crude oil inventories to round off Wednesday.

26/01

On Thursday we get some big data coming through, its a first look at fourth quarter growth numbers, we also get durable goods, wholesale inventories and jobless claims and new home sales in the States, so bonanza of data out at 13:30 on Thursday UK time.

27/01

And then Friday personal income and spending in the US along with the PCE price data, pending home sales, and the weekly Baker Hughes oil rig count.

 

 

week ahead.PNG

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  • MongiIG changed the title to Key events to watch in the week ahead

Key events to watch in the week ahead: 30 Jan – 3 Feb 2023

It has been a risk-on week for markets, with the S&P 500 and Nasdaq reclaiming their respective 200-day moving averages (MA) for the first time since April 2022.

BG_trading_charts_strategy_forex_indicesSource: Bloomberg
 

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 27 January 2023 

This week’s overview

It has been a risk-on week for markets, with the S&P 500 and Nasdaq reclaiming their respective 200-day moving averages (MA) for the first time since April 2022. Easing bearish bets are presented with further moderation in the CBOE put-call ratio after hitting extreme-bearish levels to start the year, while the VIX struggled to stay above its key 20 level for now. This comes despite further job cuts, pull-back in corporate spending and a weaker consumer spending outlook being the takeaways this week. It will be another busy week ahead, with a series of central bank interest rate decisions lined up on the calendar, along with more earnings releases from index heavyweights.

Here are some of the key events to watch next week:

1 February 2023 (Wednesday): US Fed interest rate decision

Current market expectations have largely priced for a 25 basis-point hike in the upcoming FOMC meeting, with another final 25 basis-point (bp) hike in March to bring the terminal rate to the 4.75%-5% range. This is less hawkish than what US policymakers have been guiding for, potentially bringing a scenario of some tug-of-war. Just last week, Fed officials were still throwing their support for a move above 5% and no rate cuts through 2023. Fresh economic projections and dot plot will only come in the March meeting, leaving market sentiments to be highly sensitive to the upcoming Fed statement and particularly to Fed Chair Jerome Powell’s tone at the press conference. With still above-target inflation readings, the Fed may refrain from feeding markets with any pivot hopes prematurely but any emphasis on a more data-dependent stance may potentially be looked upon positively. This is considering that recent economic data has been supportive of a less aggressive Fed, although policymakers have been unshaken thus far.

After declining close to 12% from its September 2022 peak, the US dollar has been largely in consolidation mode over the past week. Muted moves thus far suggest some wait-and-see for now, with the dollar resting on the 101.00 level of support. The overall downward bias could still be presented with the lower highs and lower lows in place. CFTC data suggests that speculators have effectively switched to net-short US dollar positioning against other G10 currencies since November 2022, having unwound previous build-up in net-long positions.

Chart 1_USDollarBasketSource: IG Charts

2 February 2023 (Thursday): Bank of England (BoE) interest rate decision

Expectations are for the BoE to deliver its last 50 bp increase (67% probability) at the upcoming meeting to 4%, before downshifting to 25 bp over the subsequent two meetings. With previous projections from the central bank pointing to a sharp decline in inflation from mid-2023, along with the UK economy in recession throughout 2023, the next phase of speculation has been revolving around a potential 25 bp rate cut in November or December this year. The GBP/USD seems to be completing an inverse head-and-shoulder pattern lately, with the pair hovering just below its neckline resistance at the 1.245 level. Any potential break above the 1.245 level may be on watch in the upcoming week.

Chart 2_GBPUSDSource: IG Charts

2 February 2023 (Thursday): European Central Bank (ECB) interest rate decision

Similar to the BoE, a 50 bp increase is the consensus (86% probability) for the upcoming ECB meeting, which will bring the key rate to 2.5%. With the central bank’s previous projection pointing to some inflation persistence until 2025, the path for higher rates seems likely to continue for the whole of 1H 2023. Current expectations are laying out 50 bp hikes over the next two meetings, before downshifting to 25 bp increases until deposit rate reaches 3.5%. The tone from policymakers has seen a firm hawkish build over the past few months, which is likely to be maintained at the upcoming meeting.

This will leave the EUR/USD in focus, which has been guided nicely by a rising channel pattern since mid-November last year. The 1.094 level may be the next line of resistance to overcome, in order to pave the way towards the 1.120 level next. Overall move remains upward bias for now, with a bullish crossover of its 100-day and 200-day MA playing out recently.

Chart 3_EURUSDSource: IG Charts

3 February 2023 (Friday): US non-farm payrolls for January

Further moderation in the US labour market is expected to be presented in the non-farm payroll report next week, with 175,000 job gains in January, down from 223,000 in December. This will mark the fourth consecutive quarter of decrease, with unemployment rate expected to see a pick-up to 3.6% (previous 3.5%) amid ongoing layoffs. Moderation in labour demand is consistent with what the Fed aims to achieve to drive a more sustainable wage growth. With the data release coming after the Fed meeting, much may also depend on the takeaway from US policymakers. If Fed officials stay firm on their hawkish tone, there is a possibility that an underperformance in job gains and a higher-than-expected unemployment rate could bring recession fears back into the spotlight once more.

1-3 February 2023: US big tech earnings release (Advanced Micro Devices, Meta Platforms, Alphabet, Apple, Amazon)

For the US earnings season so far, 25% of S&P 500 companies have released their results and 70% of them have outperformed earnings expectations. This is lower than past historical trend of around 80% but nevertheless, the still-elevated beat rate provides a less pessimistic take on current conditions, with beaten-down expectations providing a low watermark for outperformance. This week has seen mega cap tech counters taking leadership for markets’ bullish moves, and the onus will fall on several big tech names next week to keep up with the momentum. Notable earnings releases include Advanced Micro Devices, Meta Platforms, Alphabet, Apple and Amazon.

The Nasdaq 100 index has broken above a key downward trendline resistance this week, suggesting a shift in sentiments to the upside. The index may set its sight on the 12,200 level in the upcoming week and overcoming it may pave the way towards the 13,000 level next, where a Fibonacci confluence zone resides.

Chart 4_USTech100Source: IG Charts
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