Last week was pretty busy on the macroeconomic front with Fed minutes, the ECB confirming a rate cut from June and plenty of economic data- however, this was all over shadowed by the escalating Middle East conflict with Iran launching a drone attack on Israel.
The reality of such events is that it throws the market into disarray, and as this happened over the weekend, we will not be able to see any material effects until Monday morning on the market, what we have seen so far is the market de-risking into Friday’s close, and crypto currencies had a large draw down on Saturday- this resulted in the Dollar strengthening considerably by market close.
Essentially, the main thing to watch out for is any escalation or de-escalation in the Middle East this week, as this could lead to sharp moves on the market, however, we will still need to keep an eye on economic data, as when the dust settles, that is what we will always come back to.
On Monday we have European Industrial production data for February in the morning, followed by Retail Sales data from the U.S in the afternoon, Monday we expect to be more reliant on news as opposed to data as it is a relatively quiet day on the data front, so we will be led by the news on Monday.
On Tuesday we have UK employment data alongside average earnings, followed by EU ZEW economic sentiment, which should give us an interesting start to the day depending on how these releases come out, later in the afternoon we have US building permits and industrial production data which are expected strong which could keep strength in the Dollar.
On Wednesday we have UK inflation data- this is an important release as inflation does seem to be creeping up, any release over 4.5% will strengthen the Pound as it will mean there is less chance of an imminent rate cut from the BoE, later we have the same from Europe, where we are expecting inflation to drop to 2.9%- with a rate cut expected in June this will just back the case even more and potentially weaken the Euro further.
The next important release for the UK is on Friday with retail sales data out in the morning, the last release was pretty bleak and with improving weather conditions over the last month we could potentially see better spending numbers out of the UK, if inflation comes out higher then we could see a slightly improved retail sales number showing demand is still there.
