The past week's macroeconomic data generated a lot of interest among investors. The results of the business sentiment index from Germany and the reading of the consumer confidence index from the USA surprised positively. Inflation readings seem to have been particularly important.
Macroeconomic data
We started the week with macroeconomic data with a positive surprise from the results of the German business sentiment index, the IFO Business Climate. It came in at 93.3 (91 was expected), the highest reading since May last year. This may have fuelled a rise in the German DAX index (DE40), which has gained 3.3% since the start of the week.
Source: Conotoxia MT5, DE40, Daily
Key macroeconomic data on Tuesday included the reading of the US CB Consumer Confidence index for March this year. It surprised positively with a reading of 104.2 (101.0 was expected). It appears that consumers are geared up to buy despite current inflation.
Wednesday started with a monthly reading of properties awaiting completion of transactions. The data again positively surprised with an increase of 0.8% m/m. (a decline of 2.3% m/m was expected). On the day, we learned that US crude oil inventories fell by almost 7.5 million barrels (an increase of 0.1 million was expected). Despite this, the price of this crude has risen by 6% since the beginning of the week.
Source: Conotoxia MT5, XTIUSD, Daily
On Thursday, we learned the content of the Bank of England Governor's letter to the Chancellor of the Exchequer on inflation. The Governor explains that inflation is at a higher level than expected due to increases in the prices of services and food and consumer goods. He points out that the high inflation is due to the increase in global prices of energy and other tradable goods. This has been exacerbated by Russia's invasion of Ukraine, which has increased the price of energy and many agri-food commodities on the global market. Inflation in the UK is also the result of internal factors such as labour market tensions leading to price rises, as well as rising labour and other costs associated with running businesses.
On the same day, the CPI inflation reading from Germany was gently above analysts' consensus, rising by 0.8% m/m. (0.7% m/m was expected). The number of new claims for unemployment benefits from the United States was in line with expectations, coming in at around 200 000.
Two inflation readings on Friday may possibly influence market behaviour as the week draws to a close. The first is the lower-than-expected CPI inflation in the euro area, which came in at 6.9% (7.1% was expected). Due to the so-called base effect, i.e. compared to the price peaks of last March, we could expect a continuation of the decline in the rate of inflation growth in the coming months. Later today, we will learn the PCE inflation reading from the United States. It is expected to rise by 0.4% m/m. (previously 0.6% m/m).
The stock market
A successful week on the US stock markets, with the energy sector (up 6%), the real estate sector (up 5.66%) and the utilities sector (up 5.5%) standing out positively. The increases in the energy sector appear to be driven by the previously mentioned increases in oil prices.
Source: https://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Alphabet (Google) shares fell 4.5% in the past week, while the recovery on news of developing artificial intelligence was boosted by gains in Intel (Intel) shares, which gained more than 10% during the week.
Source: https://finviz.com/map.ashx?t=sec&st=w1
Currency and cryptocurrency market
The weakening of the Japanese yen, together with the strengthening of the British pound, led the GBP/JPY currency pair to rise by more than 3% during the week. The EUR/USD pair rose by 1.2%, bringing it close to resistance at the 1.1 level, the breakthrough of which could confirm the continuation of the current upward trend.
Source: Conotoxia MT5, EURUSD, Daily
The cryptocurrency market seems to remain in indecision. The price of bitcoin is fluctuating for the second week between the level of USD 27,000 and USD 29,000. Despite this, the amount of money in the cryptocurrency market as measured by stablecoin capitalisation has once again fallen, this time by 2.1% m/m.
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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