Fed and ECB Decisions to Determine Market Direction

The greenback lost against some of its pairs last week but this week presents some fresh opportunities for it to bounce back. Fed and ECB decisions are the major events for this week.

Monday, June 11: Euro Keeps Climbing

EUR

The Euro started the day strong and continued that climb as the political situation in Italy continue to improve profit-taking ahead of the ECB decision later in the week.

EUR/USD went up to a high of 1.1815 before shedding some of those gains, EUR/JPY ended the day trading around the 130.00 handle, EUR/GBP was up to 0.8797, and EUR/AUD ended the day trading at 1.5473.

CAD

The NAFTA talks continue to frustrate as Trump continued to antagonize Canadian PM Trudeau with his tweets even after their G7 meetings, causing the loonie to record losses in all the sessions.

It, however, managed to stay above the USD and Yen due to some risk-taking during the session.

USD/CAD went up to a high of 1.3028 before retreating to 1.2977, CAD/JPY started at 84.36 but went up to 84.88, and EUR/CAD rose to 1.5329.

JPY

The JPY was the biggest loser, with traders taking more risks even though trade tensions remained after the G7 summit.

USD/JPY rose from 109.90 to end the day at 110.44, AUD/JPY started the session at 83.64 but later went up to 84.00, and GBP/JPY rose to 147.50.

Events of the week

Trump-Kim Summit: Tuesday, 1:00.

This meeting will affect all markets including the financial market. U.S President Donald Trump will meet with North Korean leader in Singapore in a meeting that will be the first of its kind. The primary issue to be discussed between the two leaders alongside South Korean President is the denuclearization of North Korea which also wants guarantees to safeguard its regime. A successful meeting between the leaders will have positive impacts on the USD.

UK jobs report Tuesday, 8:30.

In the report for April, the Claimant Count Change went up by 31.2K but it is expected to increase by 11.2K for May. The Average Hourly Earnings for March stood at 2.6% but it is expected to drop to 2.5% in the coming report. The unemployment rate which stood at 4.2% is expected to remain the same.

US inflation: Tuesday, 12:30.

The greenback suffered the last time around when Core CP stood at 2.1%. This report comes before the Fed decision and could have a say in the direction that the Fed decision could go. If the rates are lower, then it could lead the Fed to set a more cautious tone. For May, the Core CPI is expected a rise by 0.1% m/m while Headline CPI is projected to rise by 0.2% m/m.

UK inflation: Wednesday, 8:30.

The BOE is looking to raise rates in August but that will happen if inflation increases. The inflation rate slowed down to 2.4% in April and is expected to stay the same in May. Core CPI is also expected to remain at the 2.1% it recorded in April while PPI Input will rise by 1.8%, up from the 0.4% it recorded the last time around.

US PPI: Wednesday, 12:30.

The PPI isn’t as important as the CPI but it is the last inflation report before the Fed decision. Headline PPI is projected to go up by 0.3% in May after going up by just 0.1% in April. Core CPI meanwhile is expected to stay at the same level of 0.2%.

Fed Decision: Wednesday, 18:00, press conference at 18:30.

The Fed is expected to raise the rates for the second time in 2018, keeping up with the expectations that it had earlier set for itself. The main question by investors and traders now is how many rates increase should be expected before the year runs out. The dot plot the Fed is using indicates that there is one more hike before the end of the year and will most likely occur by the end of the year.

ECB rate decision: Thursday, 11:45, with the press conference at 12:30.

The expectations are now high after reports surfaced earlier about a live discussion on the next steps in the Quantitative Easing program, something that the Governing Council failed to mention in their last meeting. The ECB might announce a reduction and end of bond buying. The euro could be boosted if the ECB would provide a clear commitment to end QE with an end date.

US Retail Sales: Thursday, 12:30.

Headline retails sales are expected to go up by 0.4% which is higher than the 0.3% witnessed in April. The Core retail sales are projected to rise by 0.3%, staying the same as April.

Japanese rate decision: Friday, early morning.

The Bank of Japan plans to stay on its stimulus. The current interest rate in the country stands at -0.10% and the BOJs decision to keep 10-year bond-yields at 0% would most likely remain untouched.