Global stocks were in a cheerful mood this week. In Europe, the DAX index, CAC 40, and FTSE MIB had their best week this year. Similarly, in the United States, the Dow Jones, S&P 500, and Nasdaq continued to rally. For the third straight week, the Dow Jones was the best-performing major index. On currencies, the US dollar index languished as its global peers like the Australian dollar, euro and the Canadian dollar rallied. Equally, commodities like copper and crude oil gained while precious metals declined. Let us look at the key events to watch in the coming week.
The Federal Reserve
The Fed will start its two-day meeting on Tuesday and deliver its interest rate decision on Wednesday. Analysts expect that the bank will not make any meaningful change to the policy. Instead, they see the bank leaving interest rates unchanged at the current range of between 0 and 0.25%. Also, they expect it to leave its current open-ended quantitative easing program in place to support the growth. Still, the most important thing will be on negative interest rates that some market participants expect to be implemented in December.
Inflation is an important thing because it influences monetary policy of a country. Indeed, central banks are formed to control inflation. In the coming week, we will receive inflation data from the US and other countries. The most important thing will be on whether consumer prices increased slightly in May or whether the countries moved into a deflation. We will receive the inflation data from China, Norway, and the US on Wednesday. This will be followed by inflation data from Sweden and Ireland on Thursday. Also, we will receive the PPI numbers from the US on Thursday.
UK industrial data
This week, the focus on the UK was that of Brexit talks. As was widely expected, the talks ended without a deal, according to Michel Barnier. This raises the stakes for Boris Johnson, who is responsible for requesting an extension at the end of the month when he meets EU leaders. In the coming week, we will continue to focus on these developments. In addition, we will get the industrial production, manufacturing production, and trade numbers on Friday. We will also receive the construction output and the general economic performance.
OPEC+ leaders will meet tomorrow to deliberate on oil prices and supply cuts. On Wednesday, the meeting was put in doubt after Saudi and Russia teamed up to put pressure on countries like Iraq and Nigeria that are not complying with the initial deal. Fortunately, today, the members made a deal with Iraq that will see it compensate for the oil production it did not cut. Therefore, on Monday, the market will react to the meeting. Also, we will watch the progress in inventories data from the US.
The euro has been one of the best-performing currency this week. It rose by more than 2% against the USD. The currency rallied more after Christine Lagarde’s ECB decided to add more than 600 billion euros into the initial QE program. In the coming week, we will not receive a lot of data from the eurozone. The most important one will be the final reading of Q1 GDP data and employment change.
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US dollar index technical outlook
The US dollar index rose slightly after the positive jobs data. The index is trading at 96.88, which is better than the day’s low of 96.44. On the daily chart, the price is still below the 50-day and 100-day exponential moving average and between the 23.6% and 38.2% Fibonacci retracement level.
Still, the index is in a steep downward trend, which means that the trend may continue as bears attempt to test the important support at 96.00. On the flip side, a move above the 38.2% retracement level will invalidate this prediction.