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Monthly Forecast – Markets Spring into Action
Posted On 04 Apr 2016
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It’s a new month, which means it’s time for us to tell you about the major financial events to watch out for over the next 30 days.
Week 1
US/NFP Report
April begins with a bang with the US NFP report on the number of new jobs added in the US for the month of March. Last month data came in well above forecasts – 242,000 vs. expectations of 195,000. Unemployment was unchanged at multi-year lows adding to the more optimistic picture.
Analysts are upbeat about March and are forecasting another 200,000 jobs. For March however, the spotlight will be on earnings. With inflation rising, investors are hopeful that wages will also rebound after falling unexpectedly in February.
FOMC Minutes
Keeping with the United States, week 1 wraps up with the FOMC minutes, which are seen as the official transcript of the Federal Reserve policy meeting. The Fed didn’t raise interest rates in March, so the minutes might not say anything new. But pay close attention to how optimistic Fed officials are about the recovery. This is very important, as it might signal whether they could be ready to raise rates again later this year.
Week 2
China inflation
The 2nd week of April holds several major market events to watch for.
On 11 April China will release inflation numbers for March. Consumer prices improved quite a bit in February, but producer prices declined for the 48th straight month. Expect more of the same in March.
Later that week we will also see inflation numbers for the UK and US. Remember, inflation data may impact the forex market significantly. This means GBP and USD.
On 13 April we go back to China for official trade numbers. China’s exports declined more than 25% in February – the 3rd biggest drop on record. Expect more bad news for March.
The week closes with more market moving data from China. This time, it’s Q1 GDP numbers. China’s economy grew just 6.8% in the 4th quarter, which was the slowest rate since 2009. GDP numbers can have a major influence on mainland China stocks. Sharp movement in either direction may trigger volatility for stocks in Europe and North America.
Week 3
Europe/ECB
The ECB shook the globe in March when it cut interest rates to new lows and expanded QE by a third. Mr. Draghi and Co. will take a breather in April, but will comment on the status of the Eurozone economy. Expect the ECB to stand firmly behind its monetary policy.
ECB action has a major impact on the euro. Last month the ECB decision sent the euro into freefall. Draghi’s press conference then sent the euro soaring. We don’t expect the same movement in April, but it’s definitely worth following.
Other data
Week 3 of April will see some moderate data releases. US housing data, UK jobs numbers, UK retail sales and Canadian CPI are all scheduled for release.
Week 4
US/Fed
On 27 April we’ll see one of the biggest market-moving events for the month – the Federal Reserve interest rate decision. If the Fed says NO to a rate rise, we may see an immediate hit for the US dollar and an immediate rise for stocks and gold.
Just like March, expectations are that we won’t see another rate hike due to volatility in the markets. But don’t be surprised if the Fed is more optimistic about the economy. After all, US economic data has improved in recent months. Any hints at future rate hikes could shake the markets. All is fair game: stocks, currencies, precious metals, you name it.
GDP
The final week of April will see more powerful data releases.
On 27 April the UK will release Q1 GDP numbers. These numbers can impact the pound and European stocks, not to mention UK interest rate expectations.
On 28 April the US will release its own Q1 GDP numbers. The US economy slowed in Q4 of last year. Expectations are that the first 3 months of 2016 will see an improvement. However, GDP growth has been the weakest in the first quarter in each of the past 2 years, mostly due to really bad winter weather. The US winter was mild this year, which means we can expect stronger growth.
Other Events
We are still monitoring commodities. We haven’t forgotten about gold’s bullish rise in the first 3 months of 2016.
What about oil? Prices seem to have bottomed already, which means we don’t expect any major downside compared with January or February. Lots of inventory data and market speculation will keep the energy markets very active.
Comment below and let us know what you’ll be trading this month and why.
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