The Core PCE Index next Friday points to further upside in US inflation. The US dollar gained against cryptocurrencies in April but lost against the G10 peers.
Financial markets’ participants have watched the cryptocurrency market taking a hit over the weekend. Most coins lost over 10% of their value in thin trading, with major coins down over 50% or more in the month.
The big question is if the cryptocurrency market weakness poses a risk to the traditional financial market assets. If we see some spillover, the volatility should increase this week.
There are no significant economic releases in the week ahead, with a few exceptions. Therefore, the focus will be on the positioning for the end of the month flows and the next week’s NFP report.
Events That May Impact Financial Markets In the Week Ahead
The Bank of England’s Governor is testifying today in front of the Treasury Select Committee, and so the pound may experience higher volatility than normal. Later in the North American session, the Fed’s Bostic speaks at an online event hosted by the Homer Hoyt Institute. After last Wednesday’s tapering hint, any news from the Fed will be scrutinised by market participants.
On Tuesday, the German IFO and the Consumer Confidence in the United States will highlight London, respectively, the North American trading session. After yet another Fed member’s speech, Evans, the market participants, prepare for the only central bank’s policy decision this week – the Reserve Bank of New Zealand’s rate statement.
Crude oil inventories next Wednesday may have an impact on the WTI crude oil price in light of the US economic recovery and the ongoing negotiations regarding the Iranian deal. On Thursday, the Preliminary GDP and the Pending Home Sales in the United States will influence the North American session, the only two events that may move markets.
Finally, the Core PCE Price Index on Friday will offer traders another clue about US inflation. The market expects the Personal Consumption Expenditure index to rose by 0.6% in the last month, following a 0.4% increase in March.
All in all, the week ahead is interesting to see how market participants cope with the weakness in the cryptocurrency market and the US dollar. For the entire month of April, the dollar diverged – rising against digital assets and falling against its G10 peers. Will the trend continue in the last full trading week of the month, or will we see a reversal?