Market analysis

Week Six markets at a glance: Key reports set to shake up markets

By Paul Reid

05 February 2024

week 6

This week promises to be pivotal for traders of all asset classes, with a selection of influential economic data releases promising to impact market sentiment and asset prices significantly. If you’re not following these three fundamental reports this week, you’re in for a few surprises when you check the charts.

Three giants dominate the stage this week:

  • Nonfarm Payrolls (Thursday, 8 February): this report unveils the number of jobs added to the US economy each month, offering a robust pulse reading of economic health. A sound jobs report could signal continued Fed Reserve rate hikes, potentially weighing on riskier assets like stocks and boosting the dollar.

  • Consumer Price Index (CPI) (Tuesday, 13 February): this metric gauges inflation levels, a key concern for the Fed and investors. A higher-than-expected CPI could further solidify hawkish Fed policy, impacting growth-oriented stocks and supporting safe-haven assets like gold.

  • Purchasing Managers' Index (PMI) (Tuesday and Wednesday): this measures manufacturing activity in various regions, reflecting economic health and future growth prospects. Strong PMI readings could indicate robust economic activity, benefiting cyclical stocks and industrial metals.

Three markets to watch

  • Stocks: investor appetite for equities might hang in the balance based on these reports. A strong jobs report coupled with high inflation could trigger profit-taking in tech and growth stocks, while cyclical and defensive sectors might find favor.

  • Forex: the dollar could see renewed strength on data indicating hawkish Fed policy and robust economic activity in the US. Conversely, weak reports might soften the dollar and benefit currencies tied to export-heavy economies.

  • Commodities: industrial metals like copper and steel could respond positively to strong PMI readings, hinting at increased demand. Gold, often viewed as a safe haven, might see mixed reactions depending on inflation data and risk appetite.

Which trading strategies?

With these potential market reactions in mind, here are some strategies traders might consider:

  • Risk Management: implement stricter stop-loss orders to mitigate potential losses in case of adverse data surprises.

  • Sector rotation: consider shifting focus towards sectors likely to benefit from the anticipated trends, such as value stocks in a rising rate environment.

  • Hedging: utilize options or other instruments to hedge against potential volatility arising from data releases.

  • Wait-and-see: adopting a wait-and-see approach until the dust settles from the data releases might be prudent for the uncertain.

These forecasts are based on historical trends and current expectations, but unforeseen events can often alter the course. Be ready to pivot if the institutions surprise everyone.

Conclusion

This week's data deluge presents both challenges and opportunities. If you are new to fundamental trading, consider testing strategies using the Exness demo account. Otherwise, add a note to your trading diary: the NonFarm, CPI, and PMI are about to shake things up this week.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Paul Reid
Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.