Major Events of Last Week
The disclosure of an increase in US core consumer prices last week helped place the US Federal Reserve firmly back on track to hike interest rates later this year. This point of viewpoint subsequently gained additional credence after Janet Yellen, the Fed Chairperson, delivered a hawkish speech endorsing this conclusion. The Greek debt crisis remained in a precarious state with Greece on the verge of running out of cash within a matter of weeks with no firm resolution still in sight. The major US indices declined last Friday typified by the Dow Jones Industrial Average dropping by nearly 54 points; the S&P500 slipping by 5 points and the NASDAQ inching downwards by just over 1 point.
The USA posted important inflationary data towards the end of last week revealing that its core Consumer Price Index, minus energy and food, had increased by 0.3% during April. Prominent economists summarized this development by advising that this impressive result definitely places a Fed interest rate hike later this year squarely back on the table. They emphasized this point by stating that the US Central Bank now has fewer reasons for not implementing its first rate increase in almost a decade.
Later in the Day, Janet Yellen surprised investors by adopting a more hawkish-than-expected stance during a speech in Rhode Island. For instance, she emphatically stressed that she anticipated the Fed implementing an interest rate hike during the course of this year amid a recovering US economy and diminishing global geopolitical issues. She specifically highlighted the inherent problems of delaying monetary tightening for too long by advising that such a policy could ignite overheating in the economy. She reiterated that the exact timing of such an event was still heavily data-dependent and that when this process does start; it will be conducted in a gradual manner.
Elsewhere, the Greek debt crisis remained at the focus of global attention. With Greece in danger of defaulting, European leaders strove hard last Friday to convince Athens to return to the negotiating table in order to formulate a sound resolution capable of diverting such a disaster. Specifically, Alexis Tsipras, the Greek Prime Minister, dashed to Riga late last week to meet with Francois Hollande, the French President, and Angela Merkel, the German Chancellor. The primary aim of their discussions was to break the technical impasses currently existing with key creditors, such as the International Monetary Fund and the European Union. Merkel advised at the end of this exchange that it had been very constructive but that a lot of work still needed to be done in order to resolve the vital concerns of key lenders. Greece needs funding to service major repayments on the 6th and 7th June.
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What to Expect This Week
The following key economic data will be released this coming week.
New Zealand will commence proceedings by presenting its Trade Balance for April on Monday. Analysts are anticipating that this key indicator will miss its mark following the recent release of a spate of disappointing economic data.
On Tuesday, the USA will disclose its Durable Goods Orders for last month. The US Dollar should acquire significant support if this result beats the consensus prediction of -0.4%.
Germany will launch Wednesday by revealing a prominent Consumer Confidence Survey for June, which is expected to drop from its previous reading of 10.1 to 10.0 this time around. The Bank of Canada will then announce its latest Interest Rate Decision and Future Guidance Policy. Investors are not expecting any serious surprises.
On Thursday, Australia will post its Private Capital Expenditure for the first quarter. The AUD could come under substantial pressure if this parameter slumps for the second consecutive month. Later, the United Kingdom (UK) is scheduled to publish its Total Business Investment for the first quarter of 2015. Pundits are presently favoring a rebound from a sequence of monthly declines. The UK will also release the second reading of its Gross Domestic Product for the first quarter, which is forecasted to rise from its original 0.3% value to 0.4%. The USA will next issue its Pending Home Sales for April, which could surprise to the upside by surpassing an anticipated 0.8% increase. Japan will close the session by declaring its latest Household Spending and Consumer Price Index figures. Economists are hoping for positive results in order to confirm an economic recovery following a prolonged period of contraction.
The Eurozone will proclaim its Private Loans for last month on Friday. If the predicted 0.4% can be verified, then such a verdict would provide further proof that the new quantitative easing measures of the European Central Bank are bearing fruit. The USA will complete the week by producing the second sight of its Gross Domestic Product for the first quarter of 2015. This event could well be market moving if the declared growth is even worse than previously advised 0.2%. For instance, economists are currently anticipating a dreadful result of -0.9%.
