Spreadex Market Update
It’s ECB day
After a firmer finish on Wall Street, European stocks are heading for a stronger start. All eyes are on the ECB.
- ECB is not expected to adjust monetary policy but hawkish tweaks to the statement could boost EUR
- Gold consolidates after reaching a monthly high
- US banks' earnings step up a gear with Q1 results from Goldman Sachs, Morgan Stanley, and Wells Fargo
US stocks closed strongly higher yesterday, despite a record high PPI inflation reading; yields slipped lower, dragging the USD southwards after nine days of gains.
This week, inflation and central bank action have been hot topics after US consumer prices hit 8.5%, a 40-year high, and UK CPI jumped to 7%, a 3-decade high. The RBNZ and the BoC both raised interest rates by 50 basis points, the first oversized hike by each central bank in over 20 years, underscoring concerns over surging inflation. Today it’s the turn of the ECB, but no changes to the interest rate are expected.
ECB
The ECB will announce its monetary policy decision today. Despite the deteriorating economic backdrop, surging inflation, and slowing growth, the ECB is still far from hiking interest rates.
In the March meeting, the ECB said that its asset purchase programme (APP) would conclude in Q3 with an interest rate hike sometime after. The market moved to price in a possible September hike. The minutes of the March ECB meeting showed that many governing council members considered that the high and persistent inflation called for immediate steps towards policy normalisation.
While the ECB is not expected to change policy today, hawkish tweaks to the policy statement or comments from ECB President Christine Lagarde, perhaps steering the market towards an earlier end to the APP and, therefore, a sooner rate hike, could help boost the euro. Let’s not forget that the ECB has been clear that APP must end before rate hikes begin.
EURUSD has bounced off support at 1.08 and has risen back to over 1.09 ahead of the meeting. A move over resistance at 1.0950 could see buyers gain momentum.
Gold
Gold prices are edging lower today, snapping a six-day winning run. The precious metal rose to a monthly high of 1981 in the previous session and consolidates ahead of the ECB rate announcement. Concerns surrounding the Russian war, combined with persistent inflation and yesterday’s weaker dollar lifted the yellow metal, overshadowing expectations of central banks adopting more aggressive paths to monetary policy normalisation to rein in inflation.
US banks
Looking towards the US open, banks will remain in focus. JP Morgan kicked off earning season yesterday with the release of a disappointing set of numbers. Profits fell by 42% as deal-making slowed owing to the uncertainty surrounding Russia and comparisons were tough after an extraordinary year in 2021. Q1 results from Goldman Sachs, Wells Fargo, and Morgan Stanley will be released today, and could see a similar fate. Goldman Sachs, which delivered record revenue and earnings last year is expected to report a 33% drop in net revenue. The stock trades down around 16% so far this year.
It's easy to open an account
- Fill in our simple online application form
- Fund your account
- Start trading the global markets instantly!
SEARCH FOR AN ARTICLE:
Enter a keyword and search for all relevant articlesMARKET ANALYSIS
RECENT POSTS
DISCLAIMER
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investors lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. For professional clients, spread betting and CFD trading can also result in losses larger than your initial stake or deposit.
Spreadex Ltd is authorised and regulated by the Financial Conduct Authority, provides an execution only service and does not provide advice in any way. Nothing within this update should be deemed to constitute the provision of investment advice, recommendations, any other professional advice in any way, or a record of our trading prices. This update does not constitute or form part of an offer of, or solicitation for a transaction in any financial instrument, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. Any persons placing trades based on their interpretation of the comments or information within this update does so entirely at their own risk.
No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained within this update by Spreadex Ltd or any of its employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained within this update.
The information contained within this update is the intellectual property of Spreadex Ltd and is protected by UK and International copyright laws. All rights reserved. Users may however freely download, distribute and reproduce extracts of the contents, subject always to accrediting Spreadex Ltd as the source and providing a hyperlink to www.spreadex.com.
