Weekly Market Outlook: Central Banks, US Jobs & Earnings in Focus
It’s a big week ahead with three major central banks providing their latest interest rate decision and monetary policy outlook. It starts with the Reserve Bank of Australia (RBA) Statement on Tuesday, then the Bank of England (BOE) Monetary Policy Report on Thursday followed by the European Central Bank (ECB) press conference a few hours later.
The market is expecting an interest rate hike from the Bank of England this Thursday. Expect heightened volatility in the British pound (GBP) and UK stocks. The outlook from the central bank will be the most important as markets expect UK interest rates to be at the highest level since 2009 by the end of the year.
The week ends with the US Non-Farm Payroll report which is the most eagerly anticipated news item on the monthly economic calendar. It can be a mover for all markets so be sure to exercise good risk management principles this week.
This week’s earnings announcements include reports from Amazon, Alphabet, PayPal, Spotify, eBay, Shell, Ford and others.
You can learn more about some of the global themes affecting the markets in this selection of education articles.
Weekly Forex Calendar
Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.
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Trader’s Radar – Bank of England Official Bank Rate
On Thursday 3 February at 12.00 pm GMT, the Bank of England (BOE) will announce its latest interest rate decision. This will be followed by a speech from BOE Governor Andrew Bailey about the decision and the accompanying monetary policy report.
The markets are expecting the central bank to increase interest rates 25 bps from 0.25% to 0.50%. Inflation is currently at record levels in the UK, employment is strong and the Omicron Covid-variant was less impactful on the economy than expected. The strength of the economy is why the markets believe the central bank will increase rates this week.
However, much of the expectation may already be priced in. The British pound has been a lot stronger against the commodity currencies such as the Australian dollar and New Zealand dollar. The US dollar has been even stronger than the British pound due to the expectation of the Fed increasing interest rates as well.
Source: Admirals MetaTrader 5, GBPUSD, Monthly - Data range: from 1 Jul 2005 to 30 Jan 2022, performed on 30 Jan 2022 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The price of GBPUSD is currently trading around horizontal support between 1.3400 and 1.3200. The price of the currency pair has turned at these levels before in 2018, 2019 and 2020.
If the buyers remain bullish on the prospects of the UK economy, these levels may serve as a platform for them to build upon. However, a break below from investors opting for the US dollar instead could see some further downside.
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Corporate Trading Updates and Stock Indices
Global stock market indices had a tough start to the year with the majority of them declining in near double-digits. However, the sell-off cooled last week with most stock indices running into technical levels of horizontal support.
This could be a critical week for stock indices – especially with the US jobs report out on Friday. If sentiment can improve, then most stock indices are trading around technical levels for buyers to build upon. However, a break below these technical levels could see an even deeper sell-off occur.
This week’s earnings announcements include reports from Amazon, Alphabet, PayPal, Spotify, eBay, Shell, Ford and others.
Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 20 Jul 2020 to 30 Jan 2022, performed on 30 Jan 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%
The S&P 500 stock market index’s sell-off stalled last week at horizontal support where buyers have turned before, around the $4,272.00 price level. The market already turned higher at the end of last week and it will be interesting to see if buyers can start an uptrend from here or if the price will break through for a deeper correction.
Traders may use the Admirals Trade.MT4 and Trade.MT5 accounts to trade contracts for differences (CFDs) on stock indices and other markets which enables you to trade long and short. Alternatively, investors may use this sell-off to identify high-quality stocks trading at lower prices to invest in from the Invest.MT5 account.
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