Week Ahead: BOE, NFP, and FAAMG oh my!
Matt Weller, CFA, CMT July 30, 2021 3:48 PM
The focus will shift from FANMAG stocks to the BOE decision and NFP report this week
There were two main highlights from last week: The Federal Reserve meeting and earnings reports from some of the planet’s most valuable companies. As we noted in our Fed recap, the central bank hinted at progress toward its goals for tapering asset purchases, but some of the comments from Chairman Powell’s testimony suggest that the full taper plan won’t be revealed until closer to Q4 (especially after Friday’s Core PCE reading, the Fed’s preferred inflation figure, fell to 3.5% y/y). Meanwhile, the big technology behemoths reported generally strong earnings, though with Tesla Motors (TSLA) as the lone exception, each of their stocks closed notably lower on the week.
Bank of England
The Bank of England meets on Thursday, and though COVID cases in the country appear to have peaked for this wave (knock on wood), the central bank is unlikely to make any immediate changes to policy. That said, there have been some hawkish sentiments emerging from the Monetary Policy Committee in recent weeks following a jump in inflation to 2.5% in June, the highest reading in three years and above the central bank’s 2.0% target. As such, traders will be watching to see if the BOE raises its inflation forecasts moving forward, hinting that the price pressures may be less transitory than expected. Finally it’s worth noting that the UK furlough scheme winds down at the end of September, so it will be interesting to see if the central bank acknowledges the potential for the labor market to weaken in the coming months.
The monthly US jobs report has been particularly volatile of late as workers remain reticent to return amidst concerns about safety and continued elevated levels of unemployment insurance. Nonetheless, traders and economists are expecting a reading in the 925K range, which would mark the strongest labor market growth in eleven months if seen. Astute readers will be watching the employment subcomponents of Monday’s ISM Manufacturing PMI report and Wednesday’s ISM Non-Manufacturing PMI report, as well as Wednesday’s ADP employment report for leading indications on whether Friday’s headline NFP report could beat expectations. Beyond the headline jobs figure, the accompanying average hourly earnings reading will also offer insight into the quality of the jobs created and potential for more inflation, with expectations currently centered on a 0.3% m/m rise.
So far, this quarter’s earnings have been characterized by stellar business results but relatively disappointing stock market reactions, as the FAAMG names last week exemplified. As always, traders are looking ahead and realizing that though the Q2 results have been undeniably strong, profit and revenue growth are likely to slow across the board heading through the second half of the year as stimulus starts to fade and the comparable quarters from last year represent slightly more normal business conditions.
Below are a few of the more notable companies that will be reporting this week:
HSBC, BABA, LLY, AMGN, BP, CVS, ROKU, GSK, UBER, GM, BYND, MRNA, SQ
- Global: Manufacturing PMI Finals (JUL)
- China: Caixin Manufacturing PMI (JUL)
- Japan: Consumer Confidence (JUL)
- Germany: Retail Sales (JUN)
- US: Construction Spending (JUN)
- US: ISM Manufacturing PMI (JUL)
- Japan: Tokyo CPI (JUL)
- Australia: Home Loans (JUN)
- Australia: Building Permits Prel (JUN)
- Australia: RBA Interest Rate Decision
- EU: PPI (JUN)
- Canada: Manufacturing PMI (JUL)
- US: Factory Orders (JUN)
- Global: Services and Composite PMIs Final (JUL)
- New Zealand: Employment Change (Q2)
- Australia: Retail Sales Final (JUN)
- Australia: RBA Chart Pack
- China: Caixin Services and Composite PMI (JUL)
- EU: Retail Sales (JUN)
- US: ADP Employment Change (JUL)
- Canada: Building Permits (JUN)
- US: ISM Non-Manufacturing PMI (JUL)
- Crude Inventories
- Australia: Trade Balance (JUN)
- Germany: Factory Orders (JUN)
- EU: Construction PMI (JUL)
- UK: Construction PMI (JUL)
- UK: BOE Interest Rate Decision
- Canada: Trade Balance (JUN)
- US: Trade Balance (JUN)
- Australia: RBA Statement on Monetary Policy
- New Zealand: Business Inflation Expectations (Q3)
- Germany: Industrial Production (JUN)
- UK: Halifax House Price Index (JUL)
- Canada: Employment Change (JUL)
- US: Non-Farm Payrolls (JUL)
- Canada: Ivey PMI (JUL)
Chart of the week: S&P 500
The S&P 500, one of the most widely followed US stock indices, closed the week within a whisker of record highs. As the chart below shows, the index has consistently found support at its 50-day exponential moving average (EMA), signaling a strong, healthy uptrend. That said, the RSI indicator is showing a bearish divergence, forming lower highs at each of the last three price peaks; this divergence signals waning buying pressure and elevated odds of a near-term top, especially if this week’s earnings report come in soft or the highly-anticipated US infrastructure bill encounters a hiccup.
Source: Tradingview, StoneX
Regardless, traders are likely to buy any short-term dips in the index unless and until support at the rising 50-day EMA is conclusively broken.
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the pair you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.