Major Events of Last Week
The hawkish Fed minutes helped the US Dollar recorded its third consecutive week of gains. Commodities and stocks also succeeded in paring earlier losses late last week by producing fresh evidence that they could withstand the instigation of a second interest rate hike by the US Central Bank as early as June. Consequently, traders increased their risk appetite last Friday enabling global equities to rally almost 0.3% although stocks still recorded their fourth straight week of losses.
After carefully studying these vital developments, prominent economists then advised that the Fed had definitely recaptured traders’ attention since they must now focus on assessing the real probabilities of a rate hike next month. Expert consensus is currently favoring a June movement especially as the prospects of Great Britain leaving the European Union dwindled substantially last week. One of the most pertinent points of the FOMC minutes was that many Fed officials expressed serious concerns that investors were failing to fully appreciate the urgency of their rate hiking strategy.
However, this problem alleviated somewhat as last week progressed by the markets revising the chances of a June rate hike upwards from 15% to 32%. The majority of traders also adopted the viewpoint that the Fed will definitely implement its second rate hike before the end of July at the very latest. Essentially, the dramatic responses of the financial and currency markets to the release of the FOMC minutes helped the Fed regain its prominence once again.
Worrisome concerns about consistent supplies from Nigeria and Canada incited oil prices to surge last week bringing the psychologically important $50 per barrel mark into focus. This bullish movement was still achieved despite the strengthening US Dollar prompting many investors to cash-in on the profits they acquired during the recent crude rebound.
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What to Expect This Week
No major global events or data releases are scheduled for Monday.
On Tuesday, the Eurozone will present a spate of key inflationary indicators which are expected to register values above their critical 50 mark. Failure to do so will bring into question the true effectiveness of the current monetary easing policies of the European Central Bank and exert fresh pressure on the euro. Later, the USA will disclose its ‘New Home Sales’ figure for April. March’s result of 511K units needs to be surpassed in order to provide investors with fresh confidence that this important sector is beginning to emerge from the mire.
Germany will commence Wednesday by revealing a prominent ‘Business Confidence Survey’. If the recent growth trend can be continued then such an outcome will add additional credence to the viewpoint that the economic powerhouse of Europe is still acquiring a strong head of steam. The Bank of Canada (BoC) will then announce its latest interest rate decision and forward guidance policies. Although a ‘No Change’ verdict is on the cards, investors will still be keen to garner any new insights into whether the BoC intends to trim its interest rates in the imminent future.
On Thursday, the United Kingdom will publish its ‘Gross Domestic Product’ (GDP) for the first quarter of 2016. Economists are predicting a strong performance after the UK released a string of better-than-expected economic indicators in recent weeks. The USA will next post its ‘Durable Goods Orders’ for April and its ‘Jobless Claims’ for the prior week ending 14th May. The former should validate that the US manufacturing sector is staging a solid recovery by growing faster than 0.8% on a monthly basis. The latter is expected to demonstrate that between 250k and 290k Americans filed first claims for unemployment benefits last week.
Japan will complete the session by issuing its ‘Consumer Price Index’ (CPI) for last month. Economists are hoping that the CPI can rebound from its prior dismal print of -0.3% in order to provide proof that the negative interest rate strategy of the Bank of Japan is starting to bear fruit.
The USA will terminate the week by posting the second sighting of its ‘Gross Domestic Product’ for the first quarter of this year. Investor sentiment will definitely receive a boost if this revision can produce any improvement over the insipid first result of 0.5%.
