Here are the Key Things to Watch This Week. Major and Decisive Events Will Govern the Market

US Inflation Data

The United States is scheduled to release consumer price inflation figures for March on Wednesday, with economists expecting core inflation, which excludes food and energy costs, to slow to 3.7% year-over-year from 3.8% the previous month.

Producer price data on Thursday is expected to point to a more modest increase. The inflation data comes after figures on Friday showed that the US economy added far more jobs than expected last month while wages rose at a steady pace, suggesting that the pace of inflation may be slow to moderate.

The combination of strong employment data and slow progress on inflation in the past two months has amplified calls among top Fed officials – including Chairman Jerome Powell – to be “patient” as they approach a decision on when to start cutting interest rates.

Fed Minutes and Speakers

The Federal Reserve is set to release minutes from its March meeting on Wednesday where officials maintained their outlook for three rate cuts this year albeit with less conviction than they had since late last year.

In the wake of Friday’s jobs data, money markets are now pricing in two rate cuts this year, down from three previously. Market watchers will also get a chance to hear from New York Fed President John Williams on Thursday. On Friday, Fed Governor Michelle Bowman downplayed any urgency to cut rates, warning that if progress on inflation were to stall it could prompt the central bank to raise rates again.

Earnings

Quarterly reports from big banks will kick off the earnings season in earnest on Friday. Investors are counting on strong corporate earnings this year to support lofty valuations as the stock market hovers near record highs.

The S&P 500 has gained more than 9% year-to-date, on track for its best first-quarter performance since 2019. But the bar may be set high for stocks to continue advancing at that pace, putting pressure on companies to deliver strong results.

Investors will also be listening to companies’ outlooks for the economy and inflation. JPMorgan Chase (JPM), Citigroup Inc (C), and Wells Fargo (WFC) are all due to report on Friday. Other big names scheduled to provide quarterly updates during the week include Delta Air Lines (DAL) and BlackRock (BLK).

ECB Meeting

The European Central Bank is widely expected to hold interest rates steady on Thursday, before embarking on a rate-cutting cycle in June. Markets see a near 100% chance of a 25 basis point cut in June, so President Christine Lagarde’s comments will be closely watched for any green light.

A slew of policymakers have explicitly pointed to June as the time for the first move, and with the latest data showing euro zone inflation unexpectedly falling to 2.4% in March, the case for easing is being reinforced.

Aside from the ECB, central bank governors in Canada and New Zealand meet on Wednesday and in Singapore and South Korea on Friday, with no changes in rates expected.

Gold Continues Record Run on Speculation, Middle East Tensions

Gold prices extended their record run on Monday, driven by speculation and simmering tensions in the Middle East which overshadowed strong US jobs data last week.

Spot gold was up 0.3% at $2,335.73 per ounce by 0646 GMT after hitting a record high of $2,353.79 earlier in the session. US gold futures rose 0.4% to $2,354.50. He added that geopolitical tensions in the Middle East could be another driver for gold.

Strong central bank buying, safe-haven demand amid rising geopolitical risks, and demand from trend-following funds have helped gold prices rise 12% since the start of the year. Meanwhile, US job growth beat expectations in March, suggesting that the US economy ended the first quarter on solid ground and could delay the Federal Reserve’s expected rate cuts this year. UBS raised its year-end gold price target to $2,250 an ounce on strong demand and higher exchange-traded fund buying.

“We expect ETFs to add to their gold holdings once the Fed starts cutting rates around mid-year,” it added in a note. In physical markets, demand for gold in India was subdued last week as buyers refrained from purchases due to a sharp rise in local prices, while prices were flat in top consumer China. Among other precious metals, silver rose 1.1% in spot trading to $27.77 an ounce. Platinum gained 0.1% to $927.78 an ounce. Palladium rose 0.2% to $1,001.76.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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