Last week was all about April’s US CPI data, which was 8.3% YoY vs 8.1% expected and 8.5% YoY in March. As the print was stronger than expected, it stroked inflation fears in the US and led to extreme volatility across many asset classes, most notably stock indices and the US Dollar. This week, the focus turns to the consumer as a swathe of consumer related data will be released, including Retail Sales from China, the US, and the UK. In addition, this seems to be retail week for earnings as companies such as HD, WMT, TGT and CSCO all look to report. Did consumers continue to spend despite rising inflation? That will be the key question this week!
CPI, inflation and the Fed
As mentioned, the US CPI print for April was 8.3% YoY vs 8.1% YoY expected. In addition, the US PPI print was 11% YoY vs 10.7% YoY expected. Although slightly lower than March’s levels, inflation data in the US is still high. Recall that the Fed targets 2% inflation! This led to Fed members to try and talk down inflation fears. The consensus seemed to be that a 50bps hike is on the table for June and July. Cleveland Fed President Loretta Mester summed up last weeks Fed speakers by saying that the September Fed meeting is the moment to take stock of whether price increases are increasing or decreasing, and how policy should respond. Was she setting the table for two 50bps hikes, and then a review? Markets should find out more this week as Fed Chairman Powell speaks on Tuesday regarding inflation.
Can the consumer save the economy?
On Friday, the markets got their first look at the Michigan Consumer Sentiment report for May. The headline reading was 59.1 vs 64 expected and 65.2 in April. This was the lowest reading since August 2011! The major contributor to the low reading was concern over inflation. This week, the US will release Retail Sales. Expectations for the headline print for April are +0.9% after a +0.5% reading in March. Ex-Autos, the reading is only supposed to be +0.4% vs +1.1% in March. Did the US consumer continue to spend despite rising inflation?
UK hoping to avoid recession.
The US isn’t the only country to release Retails Sales data this week. On Friday, the UK will release Retails Sales numbers of its own for April. The headline print is expected to increase to -0.2% from -1.1% in March. The expectation is similar for the ex-fuel reading, -0.2% vs -1.1% in March. On May 5th, BOE Governor Bailey said that the central bank had concerns about raising rates into a possible recession. Indeed, the GDP reading for March was -0.1%. Additional data this week could put the UK on a slippery path as it will also release the Claimant Count Change, Industrial Production, and CPI data.
In addition to the US and the UK, China will also release Retail Sales for April this week. How much did the lockdowns in Shanghai and overall Covid restrictions across the country affect spending during April? Expectations are for a headline print of -6.1% vs -3.5% in March. In addition, China will release Industrial Production and the Unemployment Rate for April. Industrial Production is expected to have decreased to 0.4% YoY vs 5% YoY in March! The Unemployment Rate is expected to increase to 6% in April vs 5.8% in March. Traders need to watch the data, to be released on Monday, as a slowdown in China could lead to continued supply chain issues and possible slowdowns around the rest of the world.
As mentioned, this is the week of the consumer. And many consumer retailers will be releasing earnings this week. Among the most popular are M, HD, WMT, TGT, CSCO, and LOW. See my colleague Josh Warner’s complete list of important earnings releases here. Some of the other major releases this week are as follows:
RYAAY, TME, BIDU, M, HD, JD, VOD, WMT, BBWI, TGT, CSCO, LOW, AMAT, BJ, KSS, DE, FL, DKNG
Although we have listed many of the economic data events on the calendar already in this article, there are a few that haven’t been touched on. These include the latest RBA Minutes, Japan’s first look at Q1 GDP, and CPI data from Canada and Japan. Other important economic data for this week is as follows:
- New Zealand: Services NZ PSI (APR)
- Japan: PPI (APR)
- China: Industrial Production (APR)
- China: Retail Sales (APR)
- China: Unemployment Rate (APR)
- EU: Trade Balance (MAR)
- Canada: Housing Starts (APR)
- US: NY Empire State Manufacturing Index (MAY)
- Australia: RBA Meeting Minutes
- UK: Claimant Count Change (APR)
- EU: Employment Change Prel (Q1)
- EU: GDP Growth Rate 2nd Est (Q1)
- US: Retail Sales (APR)
- US: Industrial Production (APR)
- US: Manufacturing Production (APR)
- US: NAHB Housing Market Index (MAY)
- EU: ECB President Lagarde Speech
- US: Fed Chair Powell Speech
- Japan: Reuters Tankan Index (MAY)
- Japan: GDP Growth Rate Prel (Q1)
- Australia: Wage Price Index (Q1)
- China: House Price Index (APR)
- Japan: Industrial Production Final (MAR)
- UK: Inflation data (APR)
- EU: CPI Final (APR)
- Canada: CPI(APR)
- US: Housing Starts (APR)
- US: Building Permits (APR)
- Crude Inventories
- New Zealand: PPI (Q1)
- Japan: Machinery Orders (MAR)
- Australia: Employment Change (APR)
- Canada: PPI (APR)
- US: Philadelphia Fed Manufacturing Index (APR)
- US: Existing Home Sales (APR)
- New Zealand: Trade Balance (APR)
- Japan: CPI (APR)
- China: Loan Prime Rate 1 Year (MAY)
- Australia: Consumer Inflation Expectations (MAY)
- Germany: PPI (APR)
- UK: Retail Sales (APR)
- EU: Consumer Confidence Flash (MAY)
Chart of the Week: Weekly USD/CHF
Source: Tradingview, Stone X
USD/CHF has gone soaring through parity to end the week above 1.0000. This has been the sixth consecutive positive week for the pair and its highest level since the week of May 27th, 2019. USD/CHF had been moving lower since the spring of 2019, when it reached 1.0226. It touched 0.8768 during the first week of 2021 and began moving higher in a rising triangle formation. During the week of April 18th, USD/CHF busted higher out of the triangle, near 0.9460, and the pair hasn’t looked back. Over the last 6 weeks, the pair moved from a low of 0.9237 to this week’s high of 1.0049, a gain of nearly 8.8%! The target for the breakout of a rising triangle is the height of the triangle added to the breakout point, which is near 1.0160. There is no significant resistance until the highs from May 6th, 2019 at 1.0226. However, notice that the RSI is in overbought territory, an indication that USD/CHF many be ready for a pullback. First support on the weekly timeframe is the double top from March 2020 at 0.9900, just ahead of last week’s low at 0.9871. Below there, price can fall to the low from 2 weeks ago at 0.9709.
Consumer economic data and retailer earnings will be front and center this week. Can the consumer hold up the economy despite rising inflation? Watch for more volatility if the data doesn’t come out inline with expectations.
Have a great weekend!
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