Weekly Market Outlook: UK Budget & EU PMIs in Focus

With the European Central Bank, Federal Reserve and Bank of England announcements and policy changes completed, this week is quieter on the data front. However, there are some key releases that traders will be focused on.  

On Thursday, German flash manufacturing and services PMI (purchasing managers index) figures are due for release. This could confirm an official contraction and the potential start of a recession which could ultimately weigh on the euro.  

On Wednesday, traders will be focused on the UK Annual Budget Release. UK citizens are already facing record inflation from higher energy bills and a tax hike from the government which have weighed on the economy and the British pound.  

After last week’s bounce higher in global stock market indices, investors will also be looking for further momentum to the upside – especially as most turned at long-term technical support levels.  

You can learn more about some of the global themes affecting the markets in this selection of education articles.  

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Weekly Forex Calendar 

Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.  

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Trader’s Radar – UK Budget and CPI Figures

The Bank of England increased interest rates for the third consecutive meeting last Thursday. But, this Wednesday could be a defining day for the long-term trend of the British pound. In the morning, the Office for National Statistics will release the latest consumer price inflation figures with forecasts expecting a huge rise in the number.  

Later that day, HM Treasury will release the latest UK Annual Budget Release. This is where the Chancellor of the Exchequer, Rishi Sunak, will outline the government’s budget for the year which will include spending and borrowing levels and planned investments.  

The Treasury is set on increasing the national insurance rate which is effectively a tax increase. This is at a time when UK household energy bills have soared higher causing many analysts to forecast lower growth for the economy.  

Source: Admirals MetaTrader 5, EURGBP, Monthly - Data range: from 1 Sep 2005 to 20 Mar 2022, performed on 20 Mar 2022 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.  

The monthly price chart of EURGBP shown above highlights a long-term trading range that has developed between the two black horizontal support and resistance lines from circa. 0.9300 and 0.8265. Currently, the price is trading at the bottom of the range at historic support.  

Whether the price bounces higher or breaks through this level may depend on this week’s European and UK data announcements. It’s certainly a market to watch to see the directional bias that could unfold at this horizontal support level.  

Traders may look towards the lower timeframes for clues on how the market is positioning itself – higher or lower. This could include waiting for indicators such as moving averages to crossover or waiting for bullish or bearish cycle formations to unfold.  

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Corporate Trading Updates and Stock Indices 

While global stock market indices have been trading according to the geopolitical headlines, news of negotiations and talks between the US and China have helped lift sentiment. Of course, this could change at any time but most global stock market indices put in an impressive performance last week.  

Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 26 Aug 2021 to 20 Mar 2022, performed on 20 Mar 2022 at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.  Past five-year performance of the S&P 500: 2021 = 26.99%, 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08% 

Most stock market indices have been trading around long-term, historic levels of support. European indices such as the DAX 40 and CAC 40 retested the highs of the pandemic last week, while many US indices tested monthly moving averages that have historically sent prices higher.  

While the S&P 500 stock market index had a death crossover on the daily chart, the weekly chart moving averages are still bullish with price turning at the 50-exponential moving average. Traders will be looking for momentum to build from here but the daily chart price action will need to get above its moving averages first which will provide a sign of commitment from buyers in the market to keep buying at higher prices.  

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