Jump in to know the key market events and trading ideas for this week!
FOMC statement on June 10
Instruments to trade: EUR/USD, USD/JPY, USD/CHF
On June 10 at 21:00 MT time the Fed will report updated economic and financial guidelines — the first ones since last December. Also, later at 21:30 MT time the FOMC will held the press conference. There are no doubts that rates won’t go below zero as the US economy has a real potential of a V-shaped recovery as S&P 500 has almost reached the pre-crisis level. Some analysts consider that may be it’s time to even increase rates as the NFP data was encouraging. The May jobs report showed that only 2.5 million people lost jobs, while economists anticipated 8 million. Also, the unemployment rate turned out 13%, when the forecast was 20%. It was a breath of a fresh air after a long time of the negative market sentiment.
How the Fed will react to all this?
Despite a positive May jobs report, it’s highly expected that the Fed won’t change the interest rate policy and will continue stimulating the economy. According to Sam Bullard, senior economist at Wells Fargo, rates will remain near zero until the end of 2021.
Some analysts wonder that the Fed may stop its quantitative easing program on the positive tone as the economy is improving. While others think that authorities will leave its policy unchanged and wait for better indicators “until the economy has weathered recent events and is on track to achieve maximum employment and price stability”. Their quantitative easing has been reduced significantly with just $4 billion dollars per day of Treasury purchases scheduled for the coming week versus 75 billion dollars at the peak of the crisis. The Fed is likely to continue the purchases in the amounts that would be needed. On the economic outlook, most strategists think the Fed will once again focus on the severity of the situation and downgrade risks, but also may mention that the economic activity is bottoming out.
USD’s rally takes a pause, while riskier assets are modestly rising.
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
The market optimism waned amid stricter restrictions to control rising coronavirus infections. S&P 500 and Nasdaq dropped from the all-time highs, while the USD jumped higher.
S&P 500 skyrocketed to the all-time high on optimism that Biden’s fiscal stimulus will support economic growth and boost corporate earnings.
PMI reports from the EU, the UK, and the USA will be released during the day!