Weekly Market Outlook

This week’s economic calendar is by no means busy, but some of the numbers coming out are important and could potentially cause volatility, so watch out carefully. On Tuesday, the UK labor department is reporting its unemployment rate and jobless claims. Later in the day, markets will get the eagerly expected US retail sales data, following a surprisingly upbeat non-farm payrolls report in the beginning of the month. The Bank of England is holding its regular interest rate meeting on Thursday. Finally, we close the week with the UK retail sales figure on Friday.

UK April Unemployment and Jobless Claims (Tuesday)

The UK economy is projected to see 856,000 jobless claims for the month of April. If that is the case, the unemployment rate is set to rise above 4.6%. As far as the weekly jobless claims are concerned, expectations are for increasing job losses in the weeks ahead. In this sense, the return of furloughed staff back to work could only relieve the labor market’s pain in the short-term but will surely not be a game changer.

US May Retail Sales (Tuesday)

Following the surprisingly positive non-farm payrolls report, there is some light optimism that there could be a rebound in consumer spending in May. After three monthly declines in a row, with the April retail sales hitting a record -16.4%, analysts see the number rebounding with 6.3%. Expectations though should not be set too high, as lockdowns across the US are by far not completely lifted.

Bank of England Meeting (Thursday)

The negative interest rates theme has become much more than just a rumor after governor Andrew Bailey’s most recent remarks that the bank has been once again considering this tool. Nevertheless, the barrier to such a move has always been and is still pretty high, as going negative on rates would inflict severe pain upon the financial sector. In the context of mass furloughing of employees, which makes the unemployment picture quite unclear, it is really hard to determine what the BOE can do at the moment. If reopening continues, unemployment figures may not be as shocking as initially anticipated, and the -20.4% GDP contraction in April could actually be the bottom from which the UK economy starts to rebound.

UK May Retail Sales (Friday)

Retail sales took a brutal blow, recording a 18.1% decline in April, with the UK economy having been in a state of shutdown for the entire month. The latest consumer credit figures showed individuals paying down their debt at a rapid pace, which promises to keep spending subdued for some time. Furloughed employees are not expected to go on a shopping spree anytime soon, either. With all this in mind, it is reasonable to expect that consumers are likely to limit discretionary spending.