The Super Thursday last week looked as a disappointment up to some point as the ECB made every effort not to signal a shift that could buoy the euro and the ex-FBI director’s testimony on Russian interference into the US elections turned out to be a non-event for the markets. However a shocking result in the UK elections where Tories lost their majority delivered a major move on GBPUSD which could continue amid a very intensive calendar for the UK this week. However, the FOMC meeting is the biggest event this week as it could decide on the fortunes of the US dollar. Finally, the key report from New Zealand could be a turning point for a red-hot currency called “kiwi”.
What to watch for today:
- 6:35 pm BST - Wilkins (BOC) speaks about diversity in the Canadian economy
- 9:30 am BST - Debelle (RBA Assistant Governor) speaks in Hong Kong
Later this week:
- FED’s decision and post-meeting conference (Wednesday, 7:00 pm BST)
The June FOMC meeting has been highly anticipated by the markets. The Fed has been broadly expected to increase interest rates for the second time this year and a failure to do so could cause a major depreciation of the US dollar. If the hike is delivered, investors will focus on the Fed’s communication. Markets want to know if the FOMC still sees another hike this year despite somewhat mixed macroeconomic data. If Janet Yellen stays the course and sticks to the agenda assuming three rate increases this year, EURUSD could see a deeper correction.
- GBP data and events - CPI inflation (Tuesday, 9:30 am BST), Unemployment rate (Wednesday, 9:30 am BST), Retail sales (Thursday, 9:30 am BST), Bank of England decision and minutes (Thursday, 12:00 pm BST)
Even without the elections that would be a crucial week for the British pound as we will get all the key monthly data and the Bank of England decision. The UK economy has been disappointed recently and the reports will show if that could be a trend and how could the Bank of England react to this. Weaker reports and more cautious Bank of England could cause additional GBP weakness. Obviously now all these events will be clouded by a political landscape. Coalition talks and approach to Brexit negotiations could be crucial for pairs like GBPUSD and EURGBP.
- Q1 GDP report in New Zealand (Wednesday, 11:45 pm BST)
It is not common for us to include reports from New Zealand among top market events of the incoming week. However, this time the Q1 GDP report could be a real market mover. The New Zealand’s dollar had an amazing streak, taking pairs like NZDUSD, NZDCAD or EURNZD to some key levels. Expectations are very high after an upbeat report from Australia that helped the Australian currency so a weaker report from New Zealand could potentially be a turning point on currency pairs mentioned above.