Calendar Week 11 – 2022

NOTE: NORTH AMERICA has shifted onto DAYLIGHT SAVINGS TIME. So adjust your market opening time accordingly.

 

Some of the heat in commodities came off last week, but they still sit at elevated prices. Talks over the weekend indicate a ceasefire in the Ukraine is imminent, but do not hold your breath for that. There is still a bigger risk that NATO will be dragged into the conflict as it escalates. That is far scarier but also at this point, a far more likely scenario to play out than Ukraine surrendering to Russia. Whilst the market has calmed somewhat in commodities, we are far from out of the woods yet and volatility will remain for some time to come. Expect prices to spike and fall (across all markets) as we run from one headline to the next.

 

The ECB and FOMC

 

Meanwhile in financial markets, interestingly the ECB came out this week overly bullish, which gave the Euro a short-lived relief rally. It was not long as the US dollar dominated this week as their inflation ticked higher to 7.9%. All eyes will be on the FOMC meeting this week as rate rise expectations kick in and market pricing in at least a 25bps move. The market has also priced in a 70% chance of rates rising by 1.75% this cycle. However, is this an error, as the yield curve in US bonds is going full contango, inverting at the back end. The inverted yield curve is a consistent signal of a recession within 24 months. Keep an eye on this one.

 

Data Releases Ahead

 

The week ahead is busy, particularly towards the end of the week. We have inflation data from Canada and employment numbers from Australia. Also have the Kiwi GDP and US retail sales. The bigger events are the central bank meetings, from Japan on Friday, the UK Thursday night and the big one, the FOMC Thursday morning (Australian time). The Japanese will not move rates but it is expected that the UK (up to 0.75%) and US (up to 0.5%) will. The FOMC will bring a lot of volatility to price action, both around the release and the following conference 30 minutes later. Be aware of this and tighten up stops or take an executive decision to exit prior to the news for capital protection.