Earnings reports from the big names in the tech sector will be firmly on the radar of traders this week and are likely to be the key drivers of market direction, particularly with the Fed now entering its blackout period (ahead of the May FOMCmeeting).
So, in the absence of any new rhetoric on rates from the Fed, upcoming results from tech giants such as Amazon, Alphabet, Facebook, and Microsoft could be the prime determinants of the market’s mood over the coming days.
If we happen to come out this week with a healthy and robust-looking tech sector, this could help to counter some of the recession concerns which are currently capping moves to the upside in risk assets.
Conversely, if we see some downside misses from the tech sector this could exacerbate fears regarding the depth and breadth of any impending economic downturn.
In currencies, the Australian Dollar is being weighed down by weaker commodity prices and has slipped below the US$0.67 handle (during Asian trading hours on Monday). Traders of the AUD will be eyeing up the local CPI data released on Wednesday, in attempting to assess whether the RBA will resume its rate-hiking ways in May.
The Euro has been in consolidation mode below the 1.10 level, with the currency buoyed by solid services PMI data at the backend of last week.
Any potential break higher by the single currency to 1.10 and beyond could be dependent upon a resumption of USD weakness. Futures markets are currently pricing in a near 90% chance of a May hike by the Fed, so the results of US macro data this week could have a big say in which direction rate expectations and indeed the USD moves.
So, again this week, the USD will probably just be following how US treasury yields react to adjustments in interest rate expectations.
Oil remains vulnerable
The oil price remains vulnerable to growth and recession concerns which are subduing the price despite the slated OPEC production cuts. The WTI price remains a few dollars below the US$80 level, and the immediate outlook for oil is unclear with the broader market toing and froing over the future path of US interest rates.
This uncertainty over how restrictive US monetary policy will be in the second half of this year is acting as a headwind for oil and has contributed to the recent price weakness.
On Monday, Asian markets were lacklustre to start the new trading week, with traders mostly in wait-and-see mode ahead of the next batch of corporate earnings in the US.
In addition to the continuation of the earnings season, other notable events this week include the release of the US GDP figures on Friday and the Bank of Japan (BOJ) policy meeting. So, there is no shortage of key events upcoming to for traders to ponder in the week ahead.
Market commentary from Tim Waterer, chief market analyst at KCM Trade.
