Futures on major stock indices indicate a positive start on the first trading day of the week. The economic calendar remains relatively weak, so the main market engines remain the trade war and the geopolitical tension between the US and Iran.
But the silence of today should not mislead you. A strong week is coming out.
The big event this week will be the FOMC’s decision and the press conference then on Wednesday. The Fed will also publish a dot plot forecast as well as expectations for inflation, growth and employment. Markets cut their expectations for interest rates this week to 21%, but for July they remained at 85.5%.
The comment at the press conference of J. Powell will be the Fed’s great opportunity at least to justify the idea of being ready to release the fiscal position in the country.
For the sake of ease, inflation is either still transient (as expressed at the FOMC meeting in May), or just does not get higher and the expectations for slower growth as a result of tariffs. Therefore, the Federal Reserve has the potential to allow the economy to continue to develop. The waiting factors are that retail sales and industrial production last week are quite good, and although employment declined in May, general employment conditions remain strong.
At 85%, the market forces / expects the Fed to act. If not, the dollar has plenty of room for promotion.
Other central bankers will meet this week, including BOE and BOJ. For BOE there are some MPCs that hint for promotion. Michael Saunders pointed out that he did not have to wait for Brexit before raising interest rates. Chief economist Andy Haldane said the moment when inflationary pressure is on the rise.
The central bank of Japan will also meet – no changes to monetary policy are expected (again).
Trader Aleksandar Kumanov