Economic Calendar April 29 - May 3

The economic calendar for this week indicates some important dates to keep in mind. First of all, the data will come from both the U.S and the Euro Zone rather than focusing on the USD’s possible actions only.

The reason why the Euro Zone should be carefully watched is that the EUR/USD parity started to gain more importance as the ECB (European Central Bank) is closer to the interest rate cuts than the FED and this will inevitably create pressure on EUR.

You may assume that the pressure on EUR does not change anything for the other countries but this is not the case in reality. Once EUR loses its position against USD, the DXY index starts to go up. As the DXY goes up, the other things that are valued against the USD become expensive. Eventually, the other things are sold and USD is bought in a very short time. Simply, strong DXY -> weak markets.

Apart from the increase in the DXY, the global trade is also affected by that situation. For the countries that export goods to Europe, this is a huge cut in their profit. In the beginning, the companies buy goods that are valued against USD. After the goods are processed and a product is exported, the value of the earnings will be less compared to previous months.

If we think it as 1x unit for the cost and 1.10x for earnings, it will drop to 1.04x earnings as EUR drops against the USD. Considering that negative impact, the developing countries’ trading balance may also get hit.

CPI Data from Euro Zone

Today we will learn the CPI in Germany and the CPI data of Euro Zone will be revealed tomorrow. The negative thing is that both cases bear some negativity for the markets.

If the CPI rates are high and the ECB does not declare that they will cut the interest rates, then the market will buy the narrative that recession risk is growing in Euro Zone. This is one of the side effects of interest rate hikes for a long time.

If the CPI rates are low and the market buys the narrative that the interest rate cuts are almost certain, then EUR is likely to lose some value and the DXY will spike once again. Even though the DXY is already high and the markets suffer from that, it still has some room to rise.

May 1 - the FED Interest Rate Decision

The FED will keep the interest rates stable, there is no surprise here. Yet, what we are waiting for is the number of planned interest rate cuts for this year.

In January and February, the investors were expecting more than 3 interest rate cuts starting from May for this year. Then, as the conditions changed, the expectations dropped to 3 or 2 interest rate cuts. Today, there are even rumors that the FED may increase the interest rates once again! Unfortunately, this is not a realistic approach while the banks are collapsing 😉

The stable interest rates will continue until the third quarter of 2024. My humble expectation is that the cuts may start in September. By that time, the markets may move sideways and there may not be a green market all around the world.

May 2 & 3 also have some important data such as initial jobless claims, Unemployment Rate and PMI etc. However, the big day is May 1 and the markets are likely to be red already. Sadly, I expect some more red days this week.

What do you expect from the data coming from the Euro Zone and the U.S.?

Share your thoughts below 👇

Hive On ✌️

Posted Using InLeo Alpha