If you didn’t know or were on another planet for the last 5 days, the financial market had a pivotal moment last week. When the US Federal Reserve announced, it was thinking about talking about tapering its USD 120 Billion monthly purchases of bonds. This was coupled with a change of the much-maligned dot plots. Which have taken a lurch towards a more hawkish policy, predicting 2 interest rates by the end of 2023.
There was no change in the monetary policy. The FOMC was just talking about what is to come next. I always think it’s better to watch what the Fed do, rather than what they say.
Nevertheless, the market got excited to bid the dollar up to very overbought levels. This probably shows that the market is worried about US inflation and the threat of higher interest rates.
This week we will see numerous FOMC speakers. I expect them to toe the party line and mention tapering, inflation, and higher interest rates.
The Bank of England will meet on Thursday, no change is expected, but I think they may be more hawkish and could give the GBP a lift higher.
Data will be dominated by flash PMI’s for June, with the US expected to provide some more strong number, as will the UK, EZ and Australia. However, Japan is still struggling.
Thursday, The US will release durable goods data for May and the final reading of US Q1 GDP.
Friday will see the latest reading of US PCE for May. The headline number is expected to be 4.2%, up from Aprils 3.6%.
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