Week Ahead: All Eyes On The Fed & Q2 GDP

Weekly Recap

The US Dollar was out of the limelight this week, and out of favour also. The greenback trended lower over the early part of the week on the back of comments from Fed members downplaying the prospect of a larger-than-75bps hike in July. Traders had been leaning towards the chances of a larger hike following the bumper June CPI report a week prior. However, on the back of those Fed comments, USD fell as traders adjusted their view. 

Instead, focus shifted to the ECB. The central bank announced the first eurozone rate since 2011 and, while the market had been expecting a 25bps hike, the bank opted for a larger 50bps hike. Despite the larger rate hike, EUR was lower on the back of the meeting as the bank downgraded its forward guidance, noting that further rate moves would be data dependent with activity in the eurozone slowing. The market has downgraded its rate hike expectations over the remainder of the year. 

The move lower in USD has had important implications for the wider markets this week. Risk assets have enjoyed a much better week with equities indices rallying across the board. The Nikkei was the strongest performer this week, rallying over 4% as the latest dovish BOJ meeting dragged the Yen lower. 

The BOJ was seen reaffirming its commitment to maintaining an easing presence in markets. Governor Kuroda cited the remaining weaknesses and uncertainty within the economy as a need for maintaining accommodative monetary policy. 

Metals prices were heavily lower over the first half of the week. Despite the weaker US Dollar, hawkish expectations ahead of the ECB meeting created a drag on gold and silver prices. However, both metals were seen recovering some ground later in the week as markets digested the meeting. 

Oil prices saw a volatile week with plenty of two-way action. Following initial strength on the week as risk assets rallied amidst USD weakness, oil prices slipped back into the end of the week. News of an unexpected EIA gasoline surplus hurt oil sentiment, raising concerns over demand there, though crude futures were able to hold onto positive ground on the week overall. 

Coming Up This Week

  • USD July FOMC

The headline event next week will of course be the July FOMC meeting. Following the larger-than-expected 75bps hike in June and the bank’s hawkish accompanying outlook, traders are braced for further fireworks this time around. Ahead of the meeting, expectations are split. On the back of the record CPI report for June which showed inflation hitting forty-year highs, some traders are looking for the bank to go even bigger this time around, looking for a 100bps hike in line with what we saw from the BOC. However, recent commentary from Fed’s Waller and Bullard pushing back against this idea has muddied the waters somewhat. 

  • USD Advance quarterly GDP

Following the FOMC meeting, traders will then be looking to advance Q2 GDP. With recessionary concerns continuing to build, any signs of a slowdown over Q2 are likely to put sharper emphasis on this issue, weighing on risk appetite. On the other hand, if activity is seen continuing robustly across Q2, this will be a solid reassurance for markets allowing risk assets to continue higher near-term. 

  • AUD Australian CPI 

The latest Aussie inflation data will be closely watched next week on the back of recent RBA hawkishness. The bank hiked rates by a further 50bps this month and signaled further hikes as likely over the remainder of the year. The latest meeting minutes showed that discussions as the bank were firmly hawkish, centered around solid employment and rising inflation. With this in mind, a strong CPI reading this week will keep hawkish RBA expectations firmly anchored, sending AUD higher near-term. 

Forex Heat Map 

Table

Description automatically generated

Technical Analysis

Our favorite technical chart of the week –  AUDUSD

The sell-off in AUDUSD from the May highs saw price trading back down to test the bear channel lows and the .6824 support level. While price pierced below the level briefly, we’ve since seen the market reversing and trading back above the level. 

Price is now printing some encouraging reversal candles on the weekly timeframe. Attention is now on the .6990 level, if price fails here, the outlook remains in favour of further downside. However, a bullish break here will put .7270 and the channel top into view. 

Chart, line chart

Description automatically generated

Source: One Royal / TradingView

Economic Calendar

Plenty to keep an eye on this week data-wise, with AUD CPI, the July FOMC and US adv GDP. See the calendar below for the full schedule of high-impact economic data. 

Graphical user interface, application

Description automatically generated

Graphical user interface, application

Description automatically generated

Table

Description automatically generated with medium confidence

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on email
Email
  • All
  • Blog
  • Economic Events
  • Featured Articles
  • Learn to Trade
  • Market Analysis
  • Market Analysis
  • News
  • News
  • OneRoyal News
  • Press Releases
  • Uncategorized
  • أخبار OneRoyal
  • الأحداث الاقتصادية
  • تحليل الأسواق
  • تصريحات صحفيه
  • تعلم كيف تتداول
  • غير مصنف
  • غير مصنف
  • مقالات مميزة
Blog

Gold rises ahead of US inflation data, could reach $2400 in this case

Read More →

Newest From Category

Newest from