CURRENCIES

US Dollar Movement:

The US Dollar showed indecision last week, with upcoming US Consumer Price Index (CPI) data on Wednesday poised to potentially set a clear direction. Should the CPI align with consensus, impact may be muted, but deviations could significantly influence the dollar due to its effects on interest rate expectations.

Gold’s Market Position (XAU/USD):

Gold attempted to continue its bullish trend as military actions escalated in Rafah. The metal ended the week on a higher note, overcoming previous downward movements and trendline resistance challenges. Future movements are likely tied to the upcoming US inflation report, which impacts Treasury yields and the dollar, potentially pushing gold towards testing its all-time high.

Sterling and Euro Focus:

The British Pound will react to upcoming labor market data and Federal Reserve commentary. The Euro is set to respond to sentiment data and other US-centric reports and speeches.

US Labor Market Insights:

Initial signs of a softening labor market appeared with disappointing Non-Farm Payroll (NFP) data and higher than expected jobless claims, which could restrain USD gains. However, an unexpectedly high CPI could counteract this trend.

Federal Reserve Influence:

Statements from prominent Federal Reserve figures, including Jerome Powell, are anticipated over the coming week. Their impact might be limited unless new significant data emerges since the May 1st Fed meeting.

STOCK MARKET

Market Movements Last Week:

The Nasdaq Composite (^IXIC) experienced a rise of just under 1%.
The S&P 500 (^GSPC) saw a notable increase of almost 2%, surpassing the 5,200 mark for the first time since early April.
The Dow Jones Industrial Average (^DJI) enjoyed a growth of over 2%, marking its eighth consecutive session of gains.

Key Economic Updates This Week:

The focus this week will be on the crucial April inflation reading and a retail sales update which are likely to influence market sentiments.
Initial jobless claims will also be closely watched following a surprise nine-month high in the first week of May.

Corporate Earnings Insights:

Corporate reports are expected to slow down with Walmart (WMT), Home Depot (HD), and Alibaba (BABA) scheduled to release their quarterly earnings.

Inflation Expectations and Impact:

The first look at April’s Consumer Price Index (CPI) is anticipated this Wednesday, with analysts predicting a year-over-year increase of 3.4%.
Core inflation, excluding food and energy, is also expected to show a slight deceleration compared to the previous month.

Economic Analysts’ Perspectives:

Morgan Stanley expects the April CPI report to signify the start of easing inflation pressures, particularly in sectors like car insurance, rent, and healthcare.
Fundstrat’s Tom Lee suggests that softer CPI data could increase the likelihood of more Federal Reserve interest rate cuts, which would be beneficial for the stock market.

Retail Sector Performance:

The upcoming retail sales report will shed light on consumer spending trends, with a focus on whether there is a slowdown from the 0.7% increase observed in March.
Performance of major retailers like Home Depot and Walmart will provide additional insights into consumer behavior, particularly in discretionary versus non-discretionary spending.

Market Reaction to Economic Data:

The market’s response to economic data has been mixed, with recent inflation data causing concerns about persistent high prices affecting the potential for interest rate cuts.
Investors are increasingly sensitive to economic indicators that could impact the Federal Reserve’s policies and the broader economic outlook.

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