Major Events of Last Week
Global equites came under pressure last Friday amid escalating concerns about the Greek Debt crisis. Stakes were substantially increased after the International Monetary Fund (IMF) surprised the markets by exiting stalled negotiations. Elsewhere, the USA published another spate of encouraging economic data late last week which unquestionably increased the prospects of an interest rate hike by the US Federal Reserve before the end of 2015. As such, investors will now focus on the Fed policy meeting, scheduled for this coming week, in order to glean any insights into the precise timing of such an event. The primary US indices tumbled last Friday exemplified by the Dow Jones Industrial Average crashing by nearly 160 points; the S&P500 falling by just over 15 points and the NASDAQ dropping by almost 32 points.
The Greek debt crisis continued to haunt the European markets last week after major negotiators failed once again to devise any meaningful resolution. Specifically, both Greek and European leaders attempted to project a brave face last Friday after an unexpected IMF exit severely dented investor confidence. They stressed that a deal was still possible by the 18th June capable of preventing Greece from entering bankruptcy and exiting the Eurozone. Analysts summarized this precarious situation by advising, that although timing was rapidly running out, they still believed that a deal could be reached next week.
Consequently, traders adopted a muted attitude last Friday as they opted to defer any major investment decisions until they can verify the emergence of a Greek debt resolution from a vitally important meeting next week. They were also nervous about making any hasty decisions before the Fed conducts its 2 day monthly policy meeting commencing on Tuesday. This is because they need to urgently assess whether the recent bout of stronger-than-expected US economic data will now encourage the US Central Bank to hike interest rates earlier than later.
For example, the indicators posted by the USA last Friday provided further evidence that its economy was beginning to garner impetus after suffering a worrisome contraction during the first quarter of 2015. The preliminary reading of a key consumer sentiment index improved from 90.7 in May to 94.6 in June surpassing economists’ expectations of 91.5. Impressive inflationary information was also presented disclosing that last month’s Producer Price index registered its largest monthly increase in almost 2.5 years. Analysts subsequently advised that a September Fed rate hike may now be a feasible option particularly if the momentum of this recovery can be sustained during the summer.
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What to Expect This Week
The following major economic indicators will be published over the course of the coming days.
Canada will present its Manufacturing Sales for April on Monday, which is expected to extend growth for the second consecutive month. US Industrial Production will then be announced for last month, which is favored to rebound from April’s dismal performance.
The Reserve Bank of Australia (RBA) will launch Tuesday by releasing the minutes from its last monetary policy meeting. If this document emphasizes the RBA’s current dovish outlook for the national economy, then expect AUD to weaken across the board. The United Kingdom will next disclose its Consumer Price Index (CPI) for May. A low inflationary figure will almost certainly convince the Bank of England to delay the instigation of any monetary tightening plans. Later, the Eurozone will also deliver its own CPI for May, which should confirm that the threat of deflation was now been effectively neutralized.
On Wednesday, Great Britain will post its Jobless Claims for May and Unemployment Rate for April. Pundits are predicting that the former indicator will decline by almost 14k and that the latter will remain steady at 5.5%. The pivotal event of the week will then occur when the US Federal Reserve issues its latest monetary policy decision. The US Dollar will be boosted by any signs implying that the Fed is now on the verge of hiking interest rates for the first time in nearly a decade. New Zealand will close the session by publishing its Gross Domestic Product for the first quarter of 2015. Growth is forecasted to have slowed to 0.6% this time around.
The United Kingdom is scheduled to release its Retail Sales for May on Thursday. A decline of 0.2% is presently the preferred forecast. The USA will then reveal key inflation data (CPI) for May which should verify a moderate rebound to +0.5% on a monthly basis.
On Friday, the Bank of Japan will declare its latest interest rate decision. As a ‘no change’ verdict is the present prediction, this event should generate no major surprises. Canada will complete the week by proclaiming its CPI for last month. After a negative value was recorded in April, expect a sharp CAD sell-off if a state of deflation is confirmed on Friday.
