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The past trading week was mostly characterized by price consolidations on the stock and crypto markets. The key crypto currency Bitcoin (BTC) corrected at its peak by around ten percentage points to 25,810 USD in the meantime, before a 1,000 USD recovery movement began. The BTC price ended the trading week below the relevant support area of the last few weeks at just under 27,000 US dollars. In addition to weaker than forecast consumer expectations and dwindling US consumer confidence, a significant rise in the US dollar index (DXY) caused noticeable headwinds in the crypto sector. The US equity indices also ended the week largely weaker. Although consumer and producer prices continued to fall in the middle of the week initially caused a bullish price reaction, core inflation indicated ongoing imponderables on the price front, which led to increased profit-taking in the second half of the week. At the end of the week, an increase in initial jobless claims that was stronger than expected by market experts fueled additional concerns about a noticeable slowdown in US economic activity. As a result, the Bitcoin price also tended south.
The following economic data will be relevant this week
The trading week starts tomorrow Tuesday with fresh data from the US retail trade. The latest consumer prices for Europe and the number of newly issued US building permits will follow in the middle of the week. The following day, the Federal Reserve of Philadelphia presented the latest data from the Philly-Fed manufacturing index. At the end of the week on Friday, market volatility should increase again. Fed Chair Jerome Powell steps in front of the cameras and could provide new information on the Federal Reserve’s interest rate and monetary policy stance in the coming months.
US retail sales to start the week
Tuesday, May 16, 2023: At 2:30 p.m. (CET), the US Census Bureau will publish the final US retail sales for the month of April. They are considered an important measure for assessing the consumer mood of private households. In the last two reporting periods, the conservative expert estimates were missed several times, despite subsequent revisions. At -0.6 percent, the final figures for March were well below the analyst forecast of -0.4 percentage points. For the past trading month of April, market participants expect US retail sales to recover by 0.7 percent. If the estimates are reached or even surpassed, there are signs of a possible stabilization in consumer sentiment and would be an indication of increasing US economic growth in the previous month. A stabilization in US consumer behavior could accelerate the US Dollar Index (DXY) price recovery and thus create headwinds for the crypto market. If, on the other hand, the expert estimate is undercut and is even in the negative range, this indicates sustained consumer restraint. Accordingly, the US dollar index should consolidate again and thus act as a tailwind for the Bitcoin price.
Inflation data for the Eurozone
Wednesday, May 17, 2023: At 11:00 a.m. (CET), Eurostat publishes the final consumer prices for Europe in April. In the May 2 advance release, inflation data came in at 7.0 percent, slightly above expectations of 6.9 percent. The experts are also anticipating an unchanged inflation rate of 7.0 percent for the final data. However, with US consumer prices continuing to fall, a surprise is imaginable here. If the inflation rate in the previous month was unexpectedly lower than analysts’ expectations, the European stock market could initially react positively and stabilize the crypto market in the short term, similar to the previous week after the publication of declining US inflation data. If, on the other hand, consumer prices are listed above the analysts’ forecast and thus gradually rise again, this would be a further setback in the fight against the ongoing inflation problem in the euro zone. Persistently high inflation rates in the countries of Europe could increasingly become a problem for the economy in the euro zone. The European financial markets could give up their gains from the previous weeks and also have a negative impact on Bitcoin prices.
In the afternoon, at 2:30 p.m. (CET), the Census Bureau will then present the preliminary figures for US building permits for the month of April. The number of permits issued serve as a leading indicator of the strength of the US housing market. Most recently, the number of new building permits at 1.430 million was slightly above expert expectations, which speaks for the first stabilization in the real estate sector, which is important for the US economy. Compared to the previous month, the analyst forecast is unchanged at 1.430 million building permits. Most recently, the US stock market and subsequently also the Bitcoin price reacted positively to the better than expected numbers from the real estate market. However, if the number of building permits granted is again weak and fails to meet the expectations of the experts, this could lead to another damper on the US stock market, which could also have a negative impact on the crypto sector.
Philly Fed manufacturing index
Thursday, May 18, 2023: At 2:30 p.m. (CET) the latest manufacturing index from the Philadelphia Fed will be presented. The surveyed index measures the situation in the manufacturing industry in Philadelphia. The Philly Fed Index is considered a leading indicator for the important Purchasing Managers Index ISM. Index values above 0 indicate a positive business development of the industrial companies, while a fall below 0 means a negative business development. In the last three months, the expert forecasts have always been clearly missed. Most recently, the final data at -31.3 was significantly below the expectations of -19.2 and led to significant price reductions on the stock and crypto market. If the manufacturing index continues to trend weak for the fourth straight month and comes in below analysts’ expectations of -19.0, the bearish reaction seen on April 20th is likely to be repeated. If, contrary to expectations, the market participants’ forecasts are beaten, this would be a first indication of a stabilization in the business prospects of US industrial companies. As a result, there could be a strong recovery on the US stock market, as the probability of a recession starting in the near future would be reduced. The crypto market should also take this development positively.
Fed Chair Powell’s speech at the end of the week
Friday, May 19, 2023: Jerome Powell steps in front of the cameras on the last trading day of the week. Investors hope that the Fed chair will specify future US monetary policy. It remains to be seen whether Powell will back up his recent statements at the press conference after the last interest rate decision on May 3rd and thus confirm his somewhat more dovish outlook. Although US inflation has continued to fall recently, the persistently high core inflation rate could persuade Powell to leave interest rates unchanged for the time being. Recently, market participants have been increasingly speculating about a first one timely rate cuts in the coming months. Powell may also feel compelled to address the problematic situation in the US banking sector. Here, too, investors could react to any news with increased purchases or sales.
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