Market participants prepare for a crucial week ahead for the US dollar as the FOMC Statement, Economic Projections and Press Conference are the main events to watch.
The G7 meetings over the weekend and the start of the Euro 2020 football tournament dominated the headlines at the end of last week, as traders and investors relaxed after a busy Thursday. The US two-months inflation rate rose at the fastest pace in more than three decades, putting pressure on the Fed to act at this week’s meeting.
The trading week starts slow, with no important events today, as the market still digests the impact of higher inflation and what the ECB communicated at its meeting. We’ve seen some strength in the US dollar on Friday, and the market participants will now focus on whether it was transitory or the beginning of a new trend.
Main Economic Events for the Week Ahead
While today is a slow day from an economic calendar perspective, starting with Tuesday, important data comes out. The Retail Sales and Industrial Production in the United States may impact markets one day ahead of the Federal Reserve decision.
The Retail Sales indicator is expected to show a slowdown in spending by 0.6%, but the core data, the one that excludes automobile sales, is forecast to increase by 0.4%. The US consumer is at the forefront of the US economic recovery, as consumer goods’ spending is up 18.4% in the first quarter of the year. The increase is the highest in any economy in the world, and that bodes well for future economic growth in America.
The main event of the trading week is Wednesday’s FOMC Statement, Economic Projections, and Statement. During the time of the three events, the US dollar and the financial markets, in general, are expected to see a jump in volatility, as the event is highly anticipated by market participants.
The focus is to see if the Fed has discussed tapering at this meeting. On any signs that it did, it brings closer the prospect of tapering the asset purchases and thus, the US dollar may continue the trend started last Friday.
On Thursday, Australian dollar traders may want to keep an eye on the market as the jobs data in Australia is released. The economy is expected to have created over 30k new jobs, and any deviation from the number or from the 5.5% expected unemployment rate should move the Aussie.
Finally, Thursday and Friday, the Swiss National Bank and the Bank of Japan also release their monetary policy statements. However, the two events are considered second-tier lately due to the lack of impact on financial markets.
All eyes are focused on the Fed’s message two days from today.