Week Ahead: All Eyes on FOMC Meeting Minutes, and ECB, BOJ Rate Decisions

　　

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

What happened in the market last week?

• The FOMC’s rate hikes have not fully suppressed consumer spending, but there are signs of fallout in other rate-sensitive areas like the industrial sector and housing. The economy’s condition is ambiguous; it can be seen as both good and bad.
• China’s Q2 GDP figures and June activity data showed a loss of economic momentum.
• Q2 GDP rose 0.8% quarter-over-quarter, a significant decline from the 2.2% growth in Q1.
• June’s activity data revealed mixed results; retail sales slowed more than expected, but industrial output unexpectedly improved.
• China’s central bank is likely to ease monetary policy further in Q3 due to the waning momentum. This slowdown in momentum poses a downside risk to our 2023 growth forecast for China.
• The FOMC’s decision in June to maintain policy unchanged was accompanied by a hawkish message. Anticipate another 25 bps hike at this week’s meeting, raising the target range to 5.25%-5.5%.

Source: VT Markets MT4

Last Week Market Pair Changes (All data is taken from the MT4 VT Markets)

Last week, the USDX experienced a significant increase of 1.19%, driven by the Federal Reserve’s hawkish stance, the euro’s weakness, and the strength of the US economy. In the same week, other currency pairs and the stock market showed diverse performances.

• GBPUSD declined by 1.83%.
• EURUSD experienced a slight decrease of 0.91%.
• NAS100 showed a negative trend with a decline of 0.69%.
• XAUUSD demonstrated a positive movement with a rise of 0.35%.
• DJ30 performed well with a gain of 2.24%.
• USDJPY showed significant growth with an increase of 2.27%.
• USOUSD had the highest growth rate of 2.51%.

Source: VT Markets Economic Calendar

What to focus on this week?

This week’s economic calendar includes important events that can significantly impact the markets: the FOMC Meeting Minutes, as well as the ECB and BOJ Rate Decisions. Traders should be well-prepared for potential market volatility resulting from these announcements and be ready to adjust their strategies accordingly.

Keep an eye on the following economic releases:

German, UK and US Flash Manufacturing PM (24 July 2023)

Germany’s Manufacturing PMI experienced a downward revision in June 2023, reaching 40.6. In contrast, the UK’s PMI was revised upward to 46.5, while the US confirmed a PMI of 46.3, marking a six-month low. 

The figures for July 2023 will be released on 24 July. Analysts predict Manufacturing PMIs as follows: Germany at 40, the UK at 46, and the US at 46.

Takeaway: As we anticipate the release of Manufacturing PMI data in these countries, it will provide us with valuable insights into the current conditions of their respective manufacturing industries. Based on the forecasted data, there are expectations that their currencies may weaken due to the manufacturing industry’s lack of expansion.

German, UK and US Flash Services PMI (24 July 2023)

US Services PMI was revised slightly higher to 54.4 in June 2023, while Germany’s was confirmed at 54.1, the lowest reading in three months. UK’s was confirmed at 53.7, the lowest in three months. 

Analysts predict Services PMIs for July 2023 as follows: Germany at 53.3, the UK at 53, and the US at 54.

Takeaway: Based on the forecasted data, we anticipate that the currencies of these countries will strengthen, as the services industry continues to be in an expanding mode.

Australia Consumer Price Index (26 July 2023) 

The annual inflation rate in Australia declined to 7% in Q1 2023, falling from an over-30-year high of 7.8% in the previous period. This marked the lowest recorded rate since Q2 2022. 

Looking ahead, analysts are forecasting a slower growth rate of 6.3% for the data covering the year up to June 2023. This information is scheduled for release on 26 July.

Takeaway: Australia’s upcoming release of CPI data will provide us with insights into the country’s inflation condition, indicating a potential decrease. This information will play a significant role in the Reserve Bank of Australia’s (RBA) decision-making process during their next meeting. Based on the projected numbers, there is a likelihood that the Australian Dollar might weaken as a result.

US FOMC Meeting Minutes (26 July 2023) 

The Fed decided to maintain its funds rate target at 5.25% in June 2023. Following the FOMC decision, the Fed Chair emphasised multiple times the necessity of raising rates further within the current year. 

For the upcoming meeting on 26 July, analysts forecast that the Fed will raise its interest rates to 5.5%.

Takeaway: The upcoming FOMC Meeting is expected to generate high volatility in the US Dollar. Based on the forecasted data, there is a possibility that the US Dollar might weaken.

European Central Bank Main Refinancing Rate (27 July 2023)

In its June meeting, the European Central Bank (ECB) raised its key interest rates by 25 bps to 4%. The ECB made it clear that future decisions would rely on incoming data and underscored its commitment to adopting a meeting-by-meeting approach in light of the uncertain economic environment, particularly as interest rates were nearing a potential peak level. 

For the upcoming 27 July meeting, analysts expect the central bank to implement another 25 bps increase to 4.25%.

Takeaway: The impending ECB Rate statement is likely to lead to increased volatility in the Euro. Based on the projected data, there is a possibility that the Euro might strengthen.

US Advance GDP (27 July 2023)

The US economy expanded at an annualised rate of 2% on a quarter-on-quarter basis in Q1 2023. This growth was higher than the previous second estimate of 1.3%. 

The figures for Q2 2023 will be released on 27 July, with analysts projecting a slower growth rate of 1.9%. 

Takeaway: The upcoming US Advance GDP report is expected to significantly impact the US Dollar. Based on the projected data, there is a possibility that the US Dollar might weaken.

BOJ Rate Statement (28 July 2023) 

In its June meeting, the Bank of Japan decided to maintain its key short-term interest rate at -0.1% and kept the 10-year bond yields at 0%. 

For its upcoming meeting on 28 July, analysts anticipate the central bank to maintain the current interest rate levels.

Takeaway: The upcoming BOJ Rate statement is expected to generate high volatility in the Japanese Yen. Based on the projected data, there is a possibility that the JPY might weaken.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.