First quarter earnings reports and inflation data, could impact on both USA equity markets’ and the U.S. dollar’s value this week.

The first quarter’s earnings season in the USA begins this week and many analysts and investors will be directing their laser focus towards the SPX, with particular attention aimed at financial firms, such as the leading investment banks. Many of which have grown in perceived ‘value’ by a stunning 25% on the markets, since the Trump election. As to whether (or not) there’s actually some substance to that exponential rise in value, will finally come under scrutiny this week, as the financial data is forensically picked apart.

The basis of the irrational exuberance regarding the Trump bubble, can be contained in a three word phrase; “the reflation trade”. The basic belief is that; with taxes slashed and a huge one trillion plus USD infrastructure project (supposedly) taking place, the USA economy would undergo a significant reflationary boost and investors wasted no time in identifying which stocks would benefit most. However, with Trump continually struggling to effect any change in government since his election, a poor earning’s season could create the conditions for a modest sell off.

On the subject of Trump, we could now we witnessing the development of a “Trump Tantrum”; currently not getting his own way, being neutered and proven completely ineffective domestically, he could be deflecting attention internationally by strikes and threats aimed towards Syria and South Korea. Therefore traders and investors need to (as ever) keep abreast of fast moving political developments, which are never contained in our economic calendars.

With regards to reflation, the latest inflation figures from the USA and the U.K. will be published over the coming week. In the U.K. inflation has rocketed from 0.3% twelve months back, to 2.3% now, with some analysts believing that (due to the Brexit effect) inflation could rise to circa 6% by the end of 2018. The key causes of the 2% annual increase has been the falling value of sterling effecting PPI and import prices, with PPI (producer purchase input prices) rising by circa 20% year on year.

As an economy with a significant negative balance of payments, that relies on an export driven consumerist economy, and wage rises stagnating at just over 2% a year, the U.K. could find itself crushed by a series of unforeseen circumstances. A significant increase in inflation, when the figures are published on Tuesday, could see the value of sterling rise versus its major peers, as investors may translate the news as evidence that the Bank of England will have to raise the UK’s base interest rates, sooner rather than later, in order to cool inflation.

 

In the USA CPI inflation is currently running at 2.7%, the latest CPI data is published on Friday and is unlikely to create much impact, given that markets will be closed on Friday for the Easter bank holiday. With the Easter holidays on the horizon, it’s a relatively quiet week for medium to high impact economic calendar events this week.

On Monday the Eurozone Sentix investor confidence is published, later in the evening Janet Yellen is appearing at the university of Michigan.

Tuesday witnesses the publication of the various inflation figures concerning the UK’s economy: CPI, HPI, RPI and PPI. Germany’s ZEW economic confidence metric is published, as is the USA jolts job opening data.

Wednesday we’ll receive Chinese inflation data early in the Asian session, thereafter the main high impact events concern the UK, both in terms of various unemployment and employment data and the governor of the Bank of England Mark Carney holding court at an event in London. Canada’s central bank will announce its current interest rate decision, followed very quickly thereafter, by a press conference and the release of the monetary policy statement, underpinning the rate decision.

Thursday sees the publication of Australia’s latest employment/unemployment data, German CPI data is published, the USA publishes its latest weekly unemployment claims metrics and the university of Michigan confidence survey data is published.

Friday witnesses the various raft of USA inflation reports published, whilst advanced retail sales data is also delivered, as are the details regarding the latest business inventories.

 

Economic Calendar (all times are BST)

Monday, 10 April

09:00 – Italy industrial production

09:30 – Sentix investor confidence

Tuesday, 11 April

00:01 – UK BRC retail sales monitor

02:30 – Australia NAB business confidence

07:00 – Japan preliminary machine tool orders

09:30 – UK CPI, PPI, RPI and HPI inflation

10:00 – German ZEW economic sentiment

15:00 – US JOLTS jobs openings

Wednesday, 12 April

02:30 – China CPI, PPI inflation

09:30 – UK unemployment, average earnings

15:00 – Bank of Canada monetary policy and interest rate statement

15:30 – US crude oil inventories

16:15 – Bank of Canada press conference

 

Thursday, 13 April

 

Tentative – China trade balance

02:30 – Australia employment change, RBA financial stability review

08:15 – Switzerland PPI

09:30 – Bank of England credit conditions survey

13:30 – Canada manufacturing sales

13:30 – US PPI, weekly unemployment claims

15:00 – US preliminary UoM consumer sentiment

Friday, 14 April

All day – Good Friday holiday

13:30 – US CPI inflation, retail sales