- Jerome Powell will be the main driver of the week
- His decisions and statements can cause volatility on the charts
- Also, do not forget to keep track of general trends in the economy.
Over the past week, Bitcoin has fallen below the $27,000 mark several times. But in general, it ended the month with a gain of 3.05%. Read a detailed review in our material.
Despite the approach of the May holidays, the current week on the world market promises to be extremely interesting. In the course of it, we will learn the Fed’s decision on interest rates. In April, the US decided to leave the rate unchanged, so now the expectations and tension in the market have reached their peak.
Immediately after the decision of the Fed, the long-awaited conference of the head of department, Jerome Powell, will begin. He will comment on the economic situation in the US, which will also greatly affect the market. But that won’t be the only “interesting event” this week. So, let’s go in order.
Tuesday. Data from China, US and Eurozone
The week of new numbers begins May 2 with Eurozone inflation data for April. Experts forecast CPI at 7.0%. If it turns out to be lower, we can expect a bullish market reaction in the sector of stocks and cryptocurrencies. Accordingly, high inflation will have a negative impact on the European Economic Area.
On Tuesday, China will publish an index of business activity. It will shed more light on the situation in international trade.
Why is China important? Much of the rebound in indices since the beginning of the year has been driven by “strong China.” Their economy is growing and it looks like this week’s macro releases will confirm the strength of the current recovery. But if the new report is negative, it will be a big surprise for investors. It may mean that the overall weak economic situation in the world is slowly depriving China of its strength. American indices (and, in the future, cryptocurrencies) will react to this with growth.
Wednesday. Fed rate decision
On May 3, all investors’ attention will be riveted on the Fed’s interest rate decision. The market gives an 88% chance that the regulator will increase it by another 25 bp. Therefore, it is obvious that if they are left unchanged, one can count on euphoria in the market.
By the way, there is still a chance that the Fed will not raise rates.
- First, many politicians demand it.
- Secondly, signs of stress in the banking sector have resumed in recent days (problems at First Republic Bank).
- And another argument against the rate hike is the better-than-expected quarterly performance of many US companies.
In any case, Wednesday promises to be a very volatile day in the cryptocurrency market. And the charts will react more actively not to the Fed’s decision itself, but to Powell’s speech.
How to read Powell’s statements. Two options
Bulls would like to hear hints of rate cuts and see if the FED is planning a rate cut this year. Here we have two options.
- Option 1: If he says that the chances of a rate cut are unlikely, this could dampen market sentiment. But not completely, because at least the market will know that rates will not rise. In addition, the markets have already “digested” the current rates in many respects and are ready to work with them.
- Option 2: Powell’s announcement that May will not be the end of the policy tightening cycle could hurt markets even worse. That is, there could be an increase again in the next months if inflation does not fall. Such a position could even cause a storm in the bond, stock and cryptocurrency markets.
In general, we observe and draw conclusions.
Thursday. ECB interest rate decision
On May 4, the focus will shift to Europe. The European Central Bank will announce its third interest rate decision of the year. Experts expect it to increase by 0.25% to 3.75%. However, if Christine Lagarde surprises the market with a 50bp rate hike, then the initial reaction in the European stock market is likely to be negative and allow prices to correct. With this option, the euro will rise, and the DXY dollar index will fall. This will have a positive effect on the strength of Bitcoin.
This will be followed by a press conference by ECB President Christine Lagarde. The official will give her assessment of the development of the economic prospects of Europe and may announce new measures of monetary policy.
Friday. US labor market report
On Friday, the US is to publish a report on non-farm payrolls. The economy is expected to have attracted 180,000 jobs – less than in March.
If analysts’ expectations are justified or the numbers are lower, it is worth planning price consolidation in the stock market. Why? Because few jobs indicate the danger of a recession in the US economy.
If the employment data turns out to be higher than expected, a steady increase in US stocks is possible. The cryptocurrency market should also benefit from this.
On the same day, the unemployment rate in the US will be announced. Experts estimate – an increase of up to 3.6%. If the figure is this or higher, then the stock markets will take it negatively, as persistent unemployment worsens consumer behavior in the medium term.
If the unemployment rate remains at the same low level, this indicates that the US economy remains resilient. Markets will expect more buying. Cryptocurrencies should also benefit from this.
Results of American companies
For those who follow brand reports, here is the list for the week:
- Monday: no important reports.
- Tuesday: Advanced Micro Devices (AMD), Ford, Uber, Starbucks.
- Wednesday: Qualcomm, Etsy, BarrickGold, Kraft-Heinz, TripAdvisor.
- Thursday: Apple, Moderna, Shopify, Coinbase, Booking, Peloton
- Friday: Warner Bros-Discovery.
The main topics to keep an eye on are, of course, iPhone sales trends and Apple earnings, as well as Coinbase’s results by crypto companies.
