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Weekly Market Outlook: All Eyes On The Fed!

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Following speculation that the Fed will likely cut rates, investors are looking to the FOMC meeting this week.

No changes are expected to the Fed funds rates at this week’s meeting. But, all eyes are on the release of the economic and interest rate projections.

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Besides the Fed, the Bank of England will also be holding its meeting this week on Thursday. Expectations are for the BoE to leave monetary policy unchanged despite some members calling for a rate hike.

On the economic front, the eurozone will see the flash manufacturing and services PMI coming out this week. The preliminary data will shed a light on the eurozone’s economy for the month of June. This will potentially provide a fair idea of how the economy fared during the second quarter of the year.

Elsewhere, the RBA will be releasing its monetary policy meeting minutes. New Zealand will be reporting on its first-quarter GDP data this week. GDP growth is expected to rise at the same pace as the fourth quarter of 2018. However, the yearly GDP growth rate is expected to fall a tad lower.

Data from Canada will cover the monthly inflation report followed by the retail sales report.

Here’s a quick recap of what’s to come in the currency markets this week.

Bank of England to Remain on the Sidelines

A somewhat busy week from the UK will see the release of the inflation report followed by the Bank of England’s monetary policy meeting.

The BoE’s meeting is unlikely to see any major changes to the policy. However, recently, some members of the monetary policy committee have said that rates should start to rise. That being said, it is unlikely that the central bank will push with any major changes.

Recent economic data has been disappointing with the UK’s economy shifting into contraction for a second consecutive month. Meanwhile, the labor market data remains the sole bright spot with the unemployment rate steady at historic lows. Amid this weakness in the economy and the Brexit uncertainty, the central bank could likely maintain the status quo.

Focus Turns to the Fed Meeting

The US Federal Reserve will be holding its monetary policy meeting this week on Wednesday. To conclude the two-day policy meeting, the Fed will be releasing its economic projections as well as the dot plot.

While we expect the Fed to keep interest rates unchanged at 2.50%, the prospects for a rate cut later this year are rising. After a weak jobs report in May and the recent inflation data showing no signs of price pressures building up, the odds for a September or December rate hike are increasing.

Investors will be looking to the Fed’s dot plot which will give an estimate on where interest rates will be in the near term. Given the current global trade uncertainty, the Fed Chair, Jerome Powell recently commented that rates would have to be cut.

Following the Fed meeting, there will also be a press conference where Powell is expected to give more information on the central bank’s forward guidance.

New Zealand First Quarter GDP

New Zealand will be releasing its quarterly GDP report this week. Estimates point to a 0.6% increase in the GDP growth for the first three months of the year. This marks the same pace of increase as seen in the previous quarter ending December 2018.

Previously, in the third quarter of 2018, New Zealand’s GDP grew at a much slower pace of just 0.3%. Most of the gains in the Q1 GDP are to come due to an increase in the construction activity, while on the other hand, growth is to be offset by weakness in the agriculture and manufacturing sectors.

The GDP data comes as the RBNZ has taken on a dovish forward guidance. On a year over year basis, New Zealand’s GDP is expected to slightly slow to a pace of 2.6%. This is down from 2.8% increase seen in the fourth quarter of 2018.

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