Last week, the volatility in crypto currencies was one of the factors that contributed to declines in equities, with alternative assets gaining enough heft to affect other asset classes. Despite crypto’s continued wild sings through the weekend, US equity futures are attempting to gain liftoff during the Asian morning session on Monday, as stocks attempt to halt two consecutive weeks of declines:
Here are the key scheduled events that could influence market sentiment this week:
Monday, May 24
- Fed speak: Cleveland Fed President Loretta Mester, Kansas City Fed President Esther George, Atlanta Fed President Raphael Bostic, Fed Governor Lael Brainard
Tuesday, May 25
- Germany Q1 GDP (final print)
- US new home sales, consumer confidence
Wednesday, May 26
- RBNZ decision
- Wall Street bank CEOs testify in Senate
- Fed Vice Chair Randal Quarles speech
Thursday, May 27
- Wall Street bank CEOs testify before House committee
- China industrial profits
- Germany consumer confidence
- US initial jobless claims, Q1 GDP (second print)
Friday, May 28
- Eurozone economic confidence, consumer confidence
- US personal income/spending, consumer sentiment
Dollar plagued by inflation fears (DXY)
The dollar index is hanging on to the psychologically-important 90 handle at the time of writing. However, the downward trend since end-March looks firmly intact, with DXY poised to test the year-to-date low. The inflation outlook is likely to remain the dominant theme in global financial markets, as investors try and gain more clues from the scheduled Fed speak and US economic data releases due in the final trading week of May.
More signs of consumer prices making a roaring comeback, with a tolerate Fed remaining off in the sidelines, could prompt more dollar weakness in the week ahead.
Commodities to have larger say on kiwi than central bank (NZDUSD)
The Reserve Bank of New Zealand is unlikely to adjust its official cash rate mid-week, although it could provide upward revisions to its economic forecasts. While a more bullish economic outlook could help push the New Zealand dollar higher, it has to shake off its correlation with commodity prices which are still coming off their peaks.
Despite having weakened against all of its G10 peers except for the Norwegian Krone last week, NZDUSD remains within the 0.71-0.73 range that it adhered to for much of the first quarter of 2021 as well. NZD bulls will be hoping for commodity prices to stabilize in order to offer support for the kiwi, which has been relying on its 50-day simple moving average to buttress prices over the past month.
Consider also the FXTM New Zealand Dollar index, which is an equally-weighted index comprising:
This index is on an obvious downward trajectory, and should this momentum persist, that could result in a new year-to-date low.
Commodity spotlight – Oil (Brent)
Brent oil registered its biggest weekly decline since March. Oil bulls are hoping that the optimism surrounding the global demand recovery will be enough to offset concerns surrounding more incoming Iranian supply, should the US-Iran nuclear deal be restored.
From a technical perspective, its 50-day simple moving average (SMA) appears to be holding as a key support level once more. The week ahead could prove telling whether the 50-SMA can continue guiding Brent higher like it has in the past two months, despite the declines in the broader commodities complex.