Another very interesting week ahead as the market looks forward to the FOMC monetary policy update following the last NFP miss and rising inflation figures. Also, important Aussie employment figures will be released before the SNB and BoJ rate statements later in the week. Traders will also watch out for the Canadian inflation report following May’s fresh job losses.
Last Week Recap
In the last trading week, market participants focused more on the domestic economic outcomes which thus resulted in a mixed risk mood. The US took the central stage again after Thursday’s CPI reports dragged the inflation rate higher to 5.2%. Despite fast recovering business activities, supplies are still falling short of demands which thus pushed up retail and consumer prices. The Fed maintained that the current inflation is transitory and eventually it would adjust as manufacturing and services sectors pick up the right pace. However, investors continue to weigh their options. With cautious optimism, S&P 500 and NASDAQ rose 0.4% and 1.9% respectively while Dow fell 0.8% last week.
Meanwhile, in the FX market, the dollar recovered sharply in the second half of the week after a downbeat first half. After gyrating between 90.25 and 89.95, the dollar index eventually laid off inflation worries and hit 90.6. The market will look forward to the FOMC this week.
In the Euro area, the ECB kept its lending rate unchanged at 0% and decided to maintain the current QE pace. However, the bank forecast higher inflation in the course of the year. The Euro got pressured in the second half of the week after a good start. On Friday, the currency fell below $1.21 and hit its lowest in about a month.
Elsewhere in America, the BoC maintained the 0.25% interest rate and its weekly C$3 billion bond purchases with a not-so-hawkish tone. CAD, therefore, added to losses after May’s poor job figures overshadowed higher oil prices. USDCAD broke above the 1.215 psychological level to its highest since mid-May.
Overall, high beta currencies all fell while the safe-haven CHF and JPY gained across the board together with the dollar. The Sterling got pressured in the second half of the week with concerns about the UK-EU post-Brexit tension, rising cases of Covid and the delay of the wider reopening of the economy.
In the commodities market, the rising dollar pressured Gold to retest the 1875-1850 key zone which is expected to be vital this week. However, oil prices are flying with the WTI touching $71 for the first since October 2018.
The Week Ahead
In the week ahead, policymakers in the US, Japan and Switzerland will make decisions concerning their monetary policies. On Wednesday, the Fed’s FOMC will attract most of the spotlight as investors expect the bank to maintain its current loose QE programs and keep rates unchanged. Meanwhile, Fed Chairman Powell will shed more light on the bank’s perception of inflation which might be the major market trigger as investors try to decipher how near the bank might consider tightening its excessively loose monetary policies.
Meanwhile, the Swiss National Bank and the Bank of Japan will release monetary statements on Thursday and Friday respectively. Market consensus looks forward to unchanged policies from both banks. Also, BoC and BoE governors will speak at different events.
US retail sales and PPI data on Tuesday some minutes after BoE Gov Bailey’s speech.
On Wednesday, the CAD CPI data will be released before the US crude oil inventories and then followed by the FOMC. BoC Governor Macklem’s speech and NZD quarterly GDP figures will round up the day
Aussie employment change will dominate highlights at the start of the Asian market on Thursday before the SNB monetary policy statements kick off the London market. The US Philly Fed Manufacturing Index and unemployment claims are also expected to be of interest to traders.
The BoJ rate statement together with GDP monthly retail sales will close the week on Friday.
Post-Brexit UK/EU Deal
Talks broke down last week between the UK and EU concerning the Northern Ireland post-Brexit deal with each accusing the other of deception. However, UK Brexit Minister and European Commission Vice President have both agreed to find a common ground before June 30. Traders might need to add the developments from this corner to the list of events to watch out for this week.
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