The three main drivers of the financial markets in the coming week
Forex market analysis
Global financial market traders and investors are facing a busy week. Macroeconomic data along with corporate financial statements will be the main driver of the market. In the meantime, three main and key questions have occupied the minds of market participants.
Will the rapid growth of inflation become a big problem?
Inflationary pressures have long worried investors. Rising demand, coronary disruptions in supply and rising production costs could significantly increase inflation in 2021. Last week, the US Producer Price Index (PPI) rose faster than market forecasts. Many analysts believe that the rapid growth of inflation is not the only problem of the US economy and the whole world will be affected by the rapid growth of inflation.
But it is not yet clear whether inflationary pressures will be temporary, according to the Federal Reserve. Now everyone is worried that inflationary pressures in the manufacturing sector will soon spread to the consumer sector. US Consumer Price Index (CPI) data will be released this week. The rapid rise in inflation can lead to an increase in the yield on treasury bonds and the fall of risky assets such as stocks.
How confident are American consumers of the economic situation?
As the US economy returns to its full potential and coronary restrictions are lifted, it remains to be seen to what extent American consumers are satisfied with the status quo and confident in their financial future. In the Corona crisis, the US government spent a variety of financial packages to support the consumer sector, and recent US employment growth has been remarkable. Because of this, American consumers may be more inclined to spend. The US retail index is expected to jump sharply. Growing consumer spending could be good news for stock markets. But if the retail index does not grow despite rising inflation, the worst-case scenario for the US stock market will be realized. In this scenario, the US economy will face a stagflation.
Will the profitability of banks increase?
The financial statements of the stock companies will be published this week and the main focus of the market will be on the banking industry. Major US banking and investment corporate reports are released on Wednesday, and if these reports are promising, we can expect strong risk aversion in the stock market.