Major Events of Last Week
Investors adopted a cautious stance towards the end of last week prompting global equities to pare a sizeable portion of their previous gains. They were unnerved by both a deteriorating Greek debt crisis and the release of dovish comments by the US Federal Reserve. The US Central Bank surprised the markets last Wednesday by revising its US economic growth predictions for 2015 lower and by indicating that its first interest rate hike may not be implemented until later in the year. The topmost US indices slumped last Friday typified by the Dow Jones Industrial Average dropping by just over 80 points; the S&P500 inching lower by nearly 9 points and the NASDAQ falling by slightly over 15 points.
A leading US official endorsed the new cautious approach of the US Federal Reserve late last week by stating that he would not support an interest rate hike until inflation improves despite a strengthening US labor market. John Williams, the Fed President of San Francisco, explained that until he can definitely confirm that inflation is approaching a targeted level of 2%, then he will refrain from backing any rate increases.
Williams proceeded by advising that, so far, no concrete evidence had yet materialized which unquestionably confirmed that inflation was climbing towards this goal. Consequently, he remained nervous about hiking rates until his stated stipulation can be emphatically validated with real data. Last week, the Fed concluded its monthly policy meeting by advising that it was keeping US interest rates unchanged. Comments issued by Janet Yellen, the Fed Chairperson, during a subsequent press conference then strongly implied that the US Central Bank was in no rush to implement its first rate increase in almost a decade.
The other main global drama gripping the world’s attention last week was undoubtedly the Greek debt crisis. Concerns rose dramatically last Friday that Greece may now both default on its debt obligations and be forced to exit the Eurozone. Athens is presently scheduled to make a repayment of 1.6 billion euros to the International Monetary Fund (IMF) by the end of June. With time rapidly running out, hopes are now pinned on an emergency meeting of prominent Eurozone officials to be held next week. This last ditched effort must produce a resolution acceptable to all parties in order to prevent an unprecedented disaster.
Prominent economists summarized the seriousness of this situation by advising that the Greek crisis was definitely very unstable and combustible. As such, they predicted that investors could well adopt a risk aversion stance next week by seeking the sanctuary of safe-haven assets, such as the US Dollar and US Treasuries.
Check out our independent review of OptionRally for a good choice of trading platforms. Or try trade with extreme volatility and profit with bitcoin trading in real time.
What to Expect This Week
Major global countries are scheduled to post the following key economic data next week.
The Eurozone will commence proceedings by presenting an important Consumer Confidence Index for June on Monday. Although this parameter is forecasted to slip lower from -5.5 in May to -5.8, Greek default worries could generate an even deeper slump.
On Tuesday, the Eurozone will supply one of the pivot events of the week by disclosing its Project Managers’ Index for this month. Expert consensus is currently favoring a healthy increase this time around. The United Kingdom will then reveal its CBI Industrial Trends for June. Investors are hoping that this Sentiment Survey can terminate recent losses by registering expansion for this month. The USA will then post its Durable Goods Orders for May, which is expected to extend previous declines. However, if the ex-transportation component of this indicator can confirm a predicted rise of 0.6%, then expect the US Dollar to rally across the board.
The USA will issue the second reading of its Gross Domestic Product for the first quarter of 2015 on Wednesday. This parameter should be revised upwards from -0.7% to -0.2% implying that the US economy did not suffer such a weather-influenced slowdown during Q1, as initially envisaged.
On Thursday, Great Britain will publish its CBI Reported Sales for this month. This major consumer confidence survey for the Retail Sector is anticipated to retract from a 2015 peak recorded in May. Later, the USA will release important inflationary data by declaring its Personal Consumptions Expenditures (PCE) for last month. The markets will study this information very carefully since it is the chosen index of inflation analyzed by the US Federal Reserve when assessing the optimum timing for its first interest rate hike. The PCE is predicted to have risen by 0.4% during May.
The USA will complete the week by issuing a key Consumer Sentiment Index for June, which is forecasted to remain steady at 94.5. Any improvement on this value will bolster the US Dollar.
