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06-17-2024

Weekly Outlook 2024.06.17-2024.06.21

Weekly Outlook 2024.06.17-2024.06.21

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Last Week's Key Events Impacting EUR/USD

 

#### United States

- **FOMC Meeting**: The Federal Open Market Committee (FOMC) kept the policy rate unchanged at its Wednesday meeting, aligning with market expectations. The updated forecasts still indicate nine rate cuts by the end of 2026, the same as the March projections, although the timing of the rate cuts has been delayed. The Fed is still expected to cut rates twice this year, in September and December.

- **Economic Data**: The US Labor Department reported that both the Consumer Price Index (CPI) and the Producer Price Index (PPI) for May were below market expectations. Fed Chair Jerome Powell emphasized the strength of the labor market during the press conference. Despite maintaining stable rates, the reassessment of the interest rate path suggests a greater likelihood of future rate cuts.

 

#### Europe

- **Political Uncertainty**: France is facing rising political uncertainty. Although the European Parliament elections did not significantly impact the markets, French President Emmanuel Macron's unexpected announcement of early elections on Sunday rattled investors. This heightened uncertainty contributed to worsening risk sentiment throughout the week, despite falling US Treasury yields amid weak CPI data.

- **Market Reaction**: European stocks performed poorly, and the euro depreciated against the dollar. The European market experienced a "Black Friday" with significant drops in stock and bond prices across multiple countries. The euro fell below 1.0700, trading at its lowest level since early May, affected by the political turmoil and weak performance in European markets.

 

#### Japan

- **Bank of Japan Decision**: The Bank of Japan (BoJ) maintained its policy rate for the second consecutive meeting, keeping it at 0-0.1%, as expected. The BoJ announced plans to detail its bond purchase reduction strategy at the July meeting. Until then, the current bond purchase levels will be maintained. The yen depreciated initially due to the BoJ's decision to delay bond purchase reductions.

 

Market Summary

- **USD Strength**: The US Dollar Index stabilized at 105.50, supported by the Fed's hawkish dot plot, which countered the impact of lower-than-expected CPI and PPI data. The index reached its highest level since early May, at 105.80.

- **Gold**: Gold rebounded technically, rising by about 1.68% to the positive region around $2,333.00. The benchmark 10-year US Treasury yield slightly fell to 4.2%, helping gold prices rise before the weekend. Mixed signals regarding future interest rates in the US did not provide a clear direction for precious metals.

- **Silver**: Before the weekend, silver traded in the positive region around $29.050. Despite the dollar's extended gains, silver found some support and rebounded from a monthly low near $28.658.

- **Oil**: Oil prices slightly declined before the weekend due to deteriorating consumer sentiment in the US, but strong predictions for oil and fuel demand in 2024 pushed oil prices up by nearly 4% for the week. WTI crude oil closed the week up over 3.97%, at $78.49 per barrel. Brent crude oil settled at $82.05 per barrel, marking the highest weekly gain since April, up nearly 3.57%.

- **Equities**: The financial market sentiment gradually formed over the weekend, with overall trading near historical highs. The S&P 500 index rose by about 1.5%, closing at 5431.60 points. The Nasdaq index surged by over 3%, closing at 17688.88 points, driven by strong tech stocks, marking its fifth consecutive day of record closing highs. The Dow Jones index fell by 0.15% for the week, closing at 38589.16 points, as investor doubts about the year's rally persisted.

- **Bitcoin**: Bitcoin's recent price dropped from $71,656 to $66,815. In the coming days, Bitcoin may undergo a short-term downward correction of up to 5% from the current trading price of $66,632, targeting a midpoint level of $63,813 within the price imbalance range of $63,118 to $64,602.

 

US Treasury Yields

- **10-Year Treasury Yield**: Following a report from the University of Arizona showing a decline in US consumer sentiment contrary to economists' expectations, US Treasury yields slightly decreased. The 10-year Treasury yield fell from 4.25% late Thursday to 4.21%. At the end of last month, this yield had briefly reached 4.60%.

 

This Week's Outlook

 

#### Central Bank Activities

- **China**: On Monday morning, the People's Bank of China (PBoC) will announce the key policy rate for the one-year Medium-Term Lending Facility. The PBoC has signaled reluctance to widen the interest rate differential with the US as this could lead to further devaluation of the yuan. Therefore, they are likely to wait until the Fed begins its rate-cutting cycle before making the next cut.

- **Australia**: The Reserve Bank of Australia (RBA) will make its rate decision on Tuesday, with the market widely expecting the key rate to remain unchanged.

- **Switzerland and the UK**: Both the Swiss National Bank and the Bank of England are expected to keep their monetary policies unchanged on Thursday.

 

#### Economic Data

- **China**: The week will start with China's monthly macroeconomic data for May, focusing on retail sales and whether the new plan for trading in old for new consumer goods stimulates more consumption.

- **Eurozone**: Key focuses will include Tuesday's release of May's Harmonized Index of Consumer Prices (HICP) and Germany's ZEW Economic Sentiment Index. The highlight of the week will be Friday's preliminary June PMI figures.

- **United States**: On Tuesday, the US will release retail sales and industrial production data for May, with the preliminary PMI figures expected on Friday.

- **Europe**: European Central Bank (ECB) President Christine Lagarde and Chief Economist Philip Lane will speak on Monday, followed by Vice President Luis de Guindos on Tuesday.

- **United Kingdom**: On Thursday, consumer price data will be released ahead of the Bank of England's decision. This report might show inflation reaching the 2% target for the first time in nearly three years. However, with core indicators possibly exceeding 3%, economists predict that policymakers will keep borrowing costs unchanged, with a decision expected in August alongside new forecasts, potentially paving the way for rate cuts.

 

Market Movements

- **Asian Markets**: The week will kick off with significant data from China on Monday, possibly showing slightly slower growth in industrial output and retail sales for May, while fixed asset investment growth stabilizes at 4.2% with an increase in real estate investment.

- **Australia**: The RBA is expected to keep the cash rate target at 4.35% on Tuesday, with market focus on inflation expectations following an unexpected rise in consumer prices in April. A pause in deflation could delay rate cuts or prompt rate hikes.

- **New Zealand**: Economic growth might return to positive territory in the first quarter after two consecutive periods of mild contraction.

- **Japan**: Key price indicators are expected to show that consumer inflation accelerated to 2.6% in May, making it likely for the Bank of Japan to raise rates next month. Trade data on Wednesday might indicate that export growth accelerated in May to the fastest pace since November 2022.

 

 

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