Stock markets pending a Fed decision
|This week investors' attention will be closely focused on the FOMC Minutes, as well as the Bank of Japan and the Bank of England meetings. Speculation surrounding expectations that the US economy will need an even softer monetary policy were intensified after the weak macroeconomic data released on Monday. The Empire State Manufacturing Index from the NY Fed fell by 26.4 points to -8.6 in June – the sharpest drop in its history.
In addition, the NAHB Housing Market Index has decreased from 66 to 64, contrary to the forecasts for growth. Despite this, analysts do not expect a reduction in interest rates during the upcoming Wednesday meeting. Already published weak statistical data has placed significant pressure on the Fed – the result of which can lead to a softer tone of comments and hints of subsequent rate cuts.
On Friday, the euro fell against the dollar, losing 0.6% to 1.1200. However, during slow trading activity on Monday, the EURUSD rose to 1.1230, managing to remain above the 50-day MA and resisting the previous downtrend. However, the recovery in demand for the dollar is now threatening the stability of the pivot trend. If the Dollar index continues in an upwards movement, it could lead to the fall of the EURUSD to 1.11000 later this week.
GBPUSD
On Tuesday morning, the British pound was one step away from an important signal level, below which the GBPUSD only fell during the period of maximum uncertainty around Brexit. Over the past week, this pair lost about 2%, so the depreciation under 1.2500 may be an important signal of financial market despair, with regards to Britain's prospects after leaving the EU. In the event of any further continuation of the downward trend, the British currency buyers could withdraw from the market, leading to a period of increased volatility. It is also possible that such a long downward movement of the national currency will force the Bank of England to step in with economic support to help to protect any further weakening of the pound.
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