At last week’s meeting, the Fed decided to leave interest rates unchanged, but its leadership gave mixed signals to the market. The Fed leadership expressed its willingness to lower interest rates if the economic outlook does not improve in the near future. "Even those (of the Fed leaders) who did not include a cut in their forecasts, believe that the arguments in favor of policy easing have become stronger", said Fed Chairman Jerome Powell at a press conference following the meeting. Powell also noted that the leadership of the central bank "will act according to circumstances, including, if necessary, very quickly". "It is better to prevent the disease than to treat it later", added Powell.
The last meeting of the Fed pushed on Thursday stock quotes to new heights, and bond yields - to the lowest levels since 2016. The dollar fell by the end of last week, while the dollar index DXY lost about 1%, falling to 96.00.
At the same time, the main US stock indexes reached new absolute highs last week on the reinforced expectations of the Fed to cut interest rates soon, while gold prices during the Asian session last Friday briefly exceeded $ 1,400 per ounce (September 2013 levels). Many economists expect that at the July (July 30 - 31) meeting the Fed will cut rates by 25 basis points.
Next week, the focus of traders' attention will be the publication of important macro statistics for Germany, the Eurozone, the USA, Japan, the UK, as well as the results of the RB of New Zealand meeting.
As always, the publication of a number of important macroeconomic data is expected during the new trading week and number important news will be published.
*) specified time – GMT
Monday June 24
Publication of important macro statistics is not planned.
However, you should pay attention to the results of the hearing of the report on inflation in the UK. The Governor of the Bank of England and members of the Monetary Policy Committee of the Bank of England will speak in Parliament with comments on the current economic situation and the outlook for the economy. At this time, the volatility in the bidding for the pound may rise sharply. One of the main benchmarks for the Bank of England in terms of monetary policy prospects in the UK, in addition to GDP, is the level of inflation. If the tone of the report is soft, then the British stock market will receive support, and the pound will decline. Conversely, the harsh rhetoric of representatives of the Bank of England regarding the containment of inflation, implying a rise in interest rates in the UK, will lead to a strengthening of the pound.
At the same time, the prospect of hard Brexit does not allow the Bank of England to begin to consider the issue of tightening monetary policy. Rather, on the contrary, in order to maintain the British economy during this period, the Bank of England may have to soften its monetary policy.
The hearing of this report will begin in the British Parliament at a time after 08:00 (GMT).
23:50 JPY Bank of Japan Monetary Policy Committee Meeting
Following the results of the last meeting on the past week, the Bank of Japan decided to leave the target level of yield on 10-year Japanese bonds around zero, and the short-term rate on deposits - at the level of -0.1%. The bank promised to maintain the current extra-soft monetary policy at least until the spring of 2020. At the subsequent press conference after the meeting of the Bank of Japan, its manager Haruhiko Kuroda repeated his famous phrase that the central bank is ready to ease monetary policy if necessary. "If necessary, we will not hesitate to ease monetary policy if we observe a threat to inflation at 2%", said Kuroda.
In the course of the meeting, which will begin on Tuesday morning (or at 23:50 GMT on Monday), the Bank of Japan’s monetary policy committee will analyze the economic dynamics in Japan and beyond, and possibly provide guidance on possible future financial prospects. politicians. The unexpected statements that can be made during this meeting will cause an increase in volatility in the JPY and the Japanese stock market.
Tuesday June 25
Publication of important macro statistics is not planned.
Wednesday June 26
02:00 NZD RB of New Zealand interest rate decision. Accompanying statement of the RBNZ
The current interest rate in New Zealand is at 1.5%, remaining one of the highest in the world among advanced economies. And it attracts investors in almost safe purchases of the New Zealand currency, which generate income, as well as traders who use "the carry-trade strategy", when the more expensive currency is bought at the expense of cheaper ones. It is widely expected that at this meeting, the interest rate will remain at the same level of 1.50%.
In early May, the RBNZ made the first reduction in a key interest rate from 2016, which demonstrates the hypersensitivity of a small exporting country to a slowdown in global economic growth.
Moderate economic growth (New Zealand's GDP growth slowed down from the second half of 2018) and the weakening of the labor market may force the Reserve Bank of New Zealand to repeat the decrease in the key interest rate, but closer to the end of the year.
The RBNZ Governor Adrian Orr said in a related statement that "there is uncertainty about the prospects for the global economy and concerns about trade remain".
Without another reduction in the rate, the New Zealand economy will probably be difficult to accelerate growth and maintain stronger inflation in the medium term.
In the accompanying statement, the RBNZ will provide an explanation of the decision on the interest rate and comments on the economic conditions that contributed to the adoption of this decision.
At this time, the volatility in the New Zealand dollar trading could rise sharply.
Earlier, the RBNZ stated that, against the background of “a multitude of uncertainties”, monetary policy “will remain soft in the foreseeable future”, but “can be adjusted accordingly”. According to the bank’s management, for a stable recovery of the New Zealand economy and inflation growth “a lower rate of the New Zealand dollar is necessary”.
12:30 USD Orders for capital goods (excluding defense and aviation)
The indicator reflects the value of orders received by manufacturers of capital goods (capital goods are durable goods used to produce durable goods and services) that imply large investments. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator. The high result strengthens the USD.
In April, the indicator came out with a value of -1.0%. If the May data is again weak, the dollar may decline. Data better than the previous value will strengthen the dollar. Growth is expected in May by +0.1% (after falling by -1.0% in the previous month), which is unlikely to support the dollar.
Thursday June 27
12:00 EUR Harmonized Consumer Price Index (HICP) in Germany (preliminary release)
This index is published by the EU Statistical Office and is calculated on the basis of a statistical methodology agreed upon between all EU countries. It serves as an indicator for estimating inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one - weakens.
In February, the HICP index (in annual terms) grew by + 1.7%, in March - by + 1.4%, in April - by 2.1%, in May - by 1.3%. Forecast for June: + 1.3%. The decline is a negative factor for the euro. If the data for June is better than the forecast or the previous value, the euro will strengthen.
12:30 USD Annual United States GDP for 1 quarter (final release)
GDP data is one of the key (along with labor market and inflation data) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report adversely affects the US dollar. In the previous quarter, GDP growth was + 2.2%.
The forecast for the 1st quarter of 2019 is + 3.1% (the first preliminary estimate was + 3.2%). Despite a slight relative decline to the first estimate, this is a strong indicator of GDP growth. Nevertheless, the data is weaker than the forecast may adversely affect the dollar quotes.
23:50 JPY Consumer price index (CPI) in the Tokyo region (excluding prices for fresh food)
This consumer price index, published by the Bureau of Statistics of Japan, reflects the assessment of price dynamics obtained by comparing the retail prices of the corresponding basket of goods and services. Tokyo’s CPI index, excluding fresh food prices, an important barometer of changes in consumer trends, was released in May with a value of + 1.1% (annualized). Forecast for June: + 1.2%. Inflation in Japan is still low. The growth of the indices may trigger a strengthening of the yen. However, the decline in the index is likely to adversely affect the yen.
During the publication of CPI indices, the volatility of trading in the yen and in the Japanese stock market is expected to increase, especially if the actual values differ significantly from the forecast values.
Friday June 28
08:30 GBP GDP for 1 quarter (final release)
GDP is considered an indicator of the general state of the British economy. The growing trend in GDP is considered positive for GBP. The GDP indicator was one of the highest in the world in annual terms, however, its growth slowed down after the Brexit referendum held at the end of June 2016. In the previous quarter, GDP growth was +0.2% and +1.4% in annual terms, in Q3 +0.6% and +1.5%.
If the data for 1 quarter will be better than the previous values, then the pound will be strengthened. Forecast: UK GDP growth in Q1 2019 was +0.2% (+1.3% in annual terms), which could have a negative impact on the pound, which is already under pressure due to the continuing likelihood of "hard" Brexit, despite the postponed date of the country's exit from the EU until October.
Last Thursday, the Bank of England kept the current monetary policy unchanged, at 0.75%. The unanimous decision of the Bank of England to leave interest rates unchanged at 0.75%, and the accompanying statement indicate concerns about the effects of Brexit on the economy and global growth.
Although the Bank of England said that it still expects a limited and gradual rate increase, if Brexit runs smoothly, economists now believe that interest rates will remain unchanged until the end of 2020. The previous forecast assumed an increase in interest rates in November 2019 and August 2020.
If the GDP data for Q1 will turn out to be weaker than the forecast, then the pound may decline significantly.
09:00 EUR Consumer price index. Basic consumer price index (preliminary release)
The consumer price index (CPI) is published by Eurostat and determines the price change of the selected basket of goods and services for the period. The index is a key indicator for measuring inflation and changing consumer preferences.
A positive result strengthens the EUR, a negative one - weakens. In March, the CPI index rose by 1.4% (in annual terms), and in April - by 1.7%, in May - by 1.2%, which indicates a slowdown in inflation. If the data for June turn out to be worse than the previous value, then this may adversely affect the euro.
Forecast for June: + 1.3%. If the data turns out to be worse than the forecast, then the euro may in short-term, but sharply lower. Data better than the forecast may strengthen the euro in the short-term, despite its low value (the ECB target inflation rate is slightly below 2.0%).
The core consumer price index (Core Consumer Price Index, Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changing consumer preferences. Food and energy are excluded from this indicator for a more accurate estimate.
A high result strengthens EUR, and a low one weakens. In April, the base CPI rose by 1.3% (in annual terms), in May - by 0.8%. If the data for June will be worse than the values for May, then this could adversely affect the euro.
If the data turns out to be better than the forecast or the previous value, then the euro will most likely respond by increasing quotes. Forecast for June: + 1.0%.
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