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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts 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.

Key events to watch in the week ahead: 8-12 May 2023

With the Fed meeting behind us, what are some of the key events to watch next week?

US Source: Bloomberg

This week’s overview

This week has been a turbulent one, with the conclusion of the Federal Reserve (Fed) meeting overshadowed by renewed banking jitters, while Apple’s resilient Q2 results provide some silver lining to end the week.

More than 80% of S&P 500 companies have released their results at the time of writing, which means that the earnings season will see some winding down ahead, bringing economic data back into the limelight to feed market moves. The upcoming weekend will also provide the opportunity for authorities to iron out any response to the renewed banking jitters. Any action (or inaction) on that front could dictate market moves to start the new week.

Aside, here are a few key events to watch in the coming week.

10 May 2023 (Wednesday): US consumer price index (CPI)

With expectations firming for an impending rate pause following the recent Federal Open Market Committee (FOMC) meeting, all eyes will be on the US CPI number next week to provide the justification that further hikes are not needed. More importantly, it will also determine if the central bank has room for rate cuts this year amid the downside risks for economic conditions.

Current market pricing is pointing to 75 basis-point (bp) worth of rate cuts by the end of this year and a higher-than-expected inflation read will likely translate to some pushback against those expectations.

Forecasts from the Cleveland Fed suggest that both headline (est 4.5%, previous 5%) and core pricing pressures (est 5.4%, previous 5.6%) may show further signs of moderation. The tendency for the Fed inflation forecasts to overstate the actual CPI over the past months may place the odds for some downside surprise.

11 May 2023 (Thursday): China’s inflation rate

Unexpected declines in China’s manufacturing Purchasing Managers' Index (PMI) lately have reflected an uneven recovery from reopening efforts and with March consumer inflation hitting its 18-month low, any subsequent uptick in prices will be on watch as a gauge for an improving demand outlook.

Nevertheless, subdued growth in prices will likely translate to more room for monetary policy easing from Chinese authorities to support growth. The economic surprise index for China is also hovering at its highest level since 2006, which suggests room for positive surprises ahead despite some hiccups in the manufacturing sector lately.

11 May 2023 (Thursday): Bank of England’s (BoE) interest rate decision

The BoE is expected to deliver its 12th straight interest rate hike at the upcoming meeting, with recent year-on-year inflation still in the double-digit (10.1% in March 2023) prompting that more needs to be done. Persistent price momentum has led market expectations to price for at least two more 25 basis-point hikes over subsequent meetings and rate cuts only in 2024, which could be deemed more hawkish compared to consensus from economists.

The economic surprise index for the UK is at its highest level since 2021, allowing some conviction for the central bank to move ahead with further rate increases. With a quarter-point increase largely priced for the upcoming meeting, forward guidance from the central bank will be the key focus. A softer tone towards wanting to see more data or a close call among policymakers to deliver a hike could be looked upon with dovish eyes and drive GBP lower.

Meeting dates Source: Refinitiv

12 May 2023 (Friday): US University of Michigan (UoM) consumer sentiment index (preliminary)

With consumer spending accounting for two-thirds of the US economy, the consumer sentiment index will be looked upon as a gauge of economic resilience ahead, fuelling the debate of a hard landing in the US or not. Since 1998, bottoming out in terms of the index seems to coincide with major lows in the S&P 500, so the absence of a sharp downturn in the reading could still be looked upon with some relief for the bulls.

Current expectations are for the upcoming reading to come in at 63.0, largely unchanged from the 63.5 in April. Barring any huge surprise on either end, market reaction has shown to be relatively short-lived from previous releases, leaving other catalysts as the greater driver for market moves.

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Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

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