Before you trade: What to watch this week in trading!
Inflation, record-high oil prices, and market instability… March 2022 is proving to be a tumultuous month in the markets.
We take a look at three key areas traders should keep their eye on this week.
The ongoing conflict in Ukraine has caused market instability. One sector that has to seem major movements is the oil industry hitting record-high levels earlier in March. Since then the price has dropped from the $140 range to $115, still incredibly high compared to earlier in 2022. The oil price could receive another significant push as the EU proposes a ban on Russian oil and coal exports. Another factor affecting the market is the increase in oil and gas from the Middle East to offset the prospect of a major Russian supply disruption. All these factors could see another surge in the oil price.
Fred Razak, chief trading strategist at CMTrading, said: “We’ve had fed Chairman Powell speaking about his most recent interest rate decisions. That’s a very important factor that’s happening on Wednesday night (March 23). Also on Wednesday, we have the yearly CPI number coming out from the UK. The Core Price Index is pretty much a gauge of inflation, which gauges the value of a particular currency. In this case, it’s the British pound and whether or not it’s getting weaker or stronger.
How CPI works:
“For CPI they take a sample of maybe five or six different types of items, such as milk, eggs, bread, and many different types of consumer goods. They see what the current prices in the market are and that’s how they gauge whether or not inflation is going up, down, or holding steady. So that’s very important. The fact that we’ve been in a pandemic kind of environment over the past two years, affects the CPI number. So that’s why CPI is very important because then it lets the central Bank of that country know whether or not it needs to increase or keep interest rates as its status-quo so that it doesn’t go into something called hyperinflation.”
“Central banks aim to avoid inflation going rampant as is the case in Turkey right now, where the value of the Turkish lira has devalued over the past six months. Central banks kind of maintain a balance in their home currency to make sure that it doesn’t get too wild in terms of its value.
“The markets don’t like inflation and the markets also don’t like uncertainty. If there’s consistency in the markets and there’s no craziness when it comes to inflation, then markets are much more balanced and less volatile and get into a frenzy.
“So that is one of the things that we’re looking for is a low core price index and to make sure that everything maintains the status quo in the markets. In addition to this week, we also have German flash manufacturing. Services and manufacturing PMI numbers coming out, so those are also somewhat of inflationary reports to let us know where we’re standing in terms of manufacturing services of their current prices.”