With the bunting hung and street parties organised, the week has acted as something of a warmup to this weekend’s coronation celebrations. Of course, there is a good number of commemorative merchandise on offer for those who feel the need. However, apart from the usual King Charles III mug or China plate, there are some rather more unusual coronation memorabilia this time around.
From a life-size cardboard cut-out of the King from Argos to commemorative Heinz tomato “Kingchup”. It is with Heinz in mind that we look at the main sauces of market movements this week, with a range of countries flying their own flags for economic data releases.
Investor focus was firmly on the US as the Federal Reserve made its much-anticipated move to raise interest rates by 0.25%. Although not exactly king-sized when compared to the 0.75% hikes it made last year, many market participants have been left guessing as to whether this will be the last move the Fed will introduce during its current cycle.
Interestingly, the central bank no longer said it "anticipates" further increases will be needed, only that it will watch incoming data to determine if more hikes "may be appropriate." However, the new language does not guarantee the Fed will hold rates steady during its next policy meeting in June by any means, with the statement noting that "inflation remains elevated," and job gains are still "running at a robust pace."
Adding to the uncertainty, at the accompanying press conference, Jerome Powell said the central bank still views inflation as too high and that it remains concerned by high price pressures.
Because of that, Powell said it's too soon to say the rate-hike cycle is over, commenting "We are prepared to do more" with rate rises if needed, and officials did not decide at the meeting to pause for their June meeting, with Fed officials making decisions on a "meeting-by-meeting" basis.
However, there were some positives to takeaway for investors, Powell also noted that he's still holding out for a "soft landing," saying "the case of avoiding a recession is in my view more likely than that of having a recession."
Attention shifted to the continent on Thursday as the European Central Bank (ECB) took their turn in raising rates by 0.25%, with borrowing costs now sitting at an overall level of 3.25%. However, unlike their peers, the ECB signalled that there would definitely be more hikes on the way: "We are not pausing - that is very clear," ECB President Christine Lagarde told a press conference afterwards. "We know that we have more ground to cover."
After a week of central bank addresses, the week’s crowning glory came in the form of US Non-Farm Payrolls, showing that 253,000 Americans joined the workforce this month, far above the 181,000 anticipated. The data also showed companies are still having to pay top dollar to acquire and retain talent, with wages rising by 0.5% versus consensus of 0.3% over the month, truly a king’s ransom…
After a bumper coronation bank holiday weekend, with the bunting taken down and the ceremonial crockery put firmly back in the cupboard, life should return to normal as the working week begins on Tuesday here in the UK.
Although coming too late to record the undoubted coronation spending on street party food, Union Jack flags and replica crowns, High Street sales numbers provided by the British Retail Consortium on Tuesday will no doubt make for interesting reading. With inflation remaining persistently high in the UK and with consumer confidence also dipping as their wage increases fail to keep up with escalating prices, economists will be keeping an eye on whether this continues to filter through to consumer spending at the tills.
With inflation still very much an issue in all major economies, attention should turn to the US on Wednesday as the world’s largest economy releases its own Consumer Price Index (CPI) numbers. Measuring the change in the price of goods and services purchased by consumers, the data is essential for economists to get a handle on price rises and will be watched closely by the US Federal Reserve who recently declared their upcoming rate policy will be much more data dependant.
Thursday will usher in The Bank of England’s (BoE) very own jamboree of economic data, truly fit for a king, as not only will Gross Domestic Product (GDP) numbers be available but also the bank will be widely expected to announce a 0.25% rate hike. Taking borrowing costs to 4.5%, the BoE will be motivated by an economy that is still proving more resilient than expected, stubbornly high services inflation, and strong pay growth.
The BoE's new economic forecast will be published alongside the rate decision and is expected to revise up the near-term growth outlook and revise down near-term inflation. For the medium term, it will likely point to inflation falling well below the 2% target next year and in 2025, a major bonus for a central bank that has seen inflation rise to or 5x its target last year.
The week will be wrapped up with US consumer confidence surveys, measuring just how buoyant they’re feeling cross the pond. There are actually two versions of this data released two weeks apart, Preliminary and Revised. Friday’s data forms the Preliminary release, which as the name suggests, is the earlier announcement and thus tends to have the most impact.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 05 May 2023.