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Week Ahead: June 1

Short Description

TWO UNMISSABLE EVENTS - ECB Meeting & NFP The euro-dollar currency pair took out 1.10 and the S&P 500 broke back above 3000 and its 200-day moving average last week. Looking ahead, whether those big level breaks can be sustained may hinge upon the upcoming ECB meeting and the May Non-farm payrolls report where another 10 million Americans might have lost their jobs. And of course we preview the economic calendar highlights for the week.

Video Script

Hi everyone...

There are two huge events that no trader should miss this week. You can miss your kid’s championship football match, you can miss your Grandma’s 90th birthday- you can definitely miss that 10 o’clock meeting - but you absolutely CANNOT miss the ECB meeting and Non-farm payrolls.
 
Joking apart, the euro-dollar currency pair took out one-ten and the S&P 500 broke back above its 200-day moving average last week– and anyone who’s been watching our weekly webinars knows we’ve been saying these are really important levels.
 
Why? Because these are both signs of a ‘risk on’ market. Now we’ve moved around those levels since – but in my eyes - investors are factoring in two things - one: policy stimulus and two: an economic recovery after lockdown policies are lifted. The ECB is a big source of stimulus and non-farm payrolls tells us how quickly the US economy is recovering.  
 
First there are some other big data points to be aware of, which I will briefly run through now. We begin the week with Whit Monday where some European markets will be closed. Otherwise it’s all about manufacturing PMIs – with those from China, Germany and the United States top of my agenda.
 
Interest rates get set this week in Australia first then in Canada and then in Europe -but I don’t expect any policy change so it will be all about what central bankers hint is coming next. Then finally we have NFP on Friday.
 
Now before I talk about these –as we’ve already agreed- UNMISSABLE events, can I ask that if you’re a trader OR if you’ve ever missed something important and want to avoid doing so again, please click that like button, it really helps spread the word for these videos.
 
So just to remind ourselves, the ECB is buying 750 billion Euros worth of government and corporate bonds in what they call the Pandemic Emergency Purchase Program or PEPP for short. Central bankers just love acronyms don’t they!
 
But the German constitutional court isn’t happy and ordered the German central bank – the Bundesbank - to stop its role in the PEPP three months after the ruling unless the ECB can prove it is ‘proportional’. Since then the European Commission has proposed a 750 billion euro rescue fund which would give out grants to the countries worst hit by the pandemic.
 
In a way the German court has forced the hands of governments – I think the euro took out 1.10 on the hope that fiscal policy- meaning government spending- finally matches monetary policy as a stimulus for the European economy.
 
But before you go thinking its all blue skies ahead – an institution from one of Europe’s most important nation states has picked a fight with the ECB about its policies. If – at this week’s meeting, the ECB fights back – and differences can’t be resolved, it could lead to the breakup of the euro.
 
Now before I wrap things up here- let’s talk NFP. A mind-numbing 20.5 million Americans lost their jobs last month. This month it is expected to be around half that – which is another shocking number of job losses, but it is an improvement.
 
The key to the response in the dollar and the S&P 500 will be whether investors still believe a quick US economic recovery is possible with this many job losses. As mad as it sounds, I’ll be watching whether the US unemployment rate stays under 20% this month to judge if the report is good or bad.
 
Right thanks everyone, good luck trading and make sure to subscribe to our channel so you don’t miss the next video.

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