The Fed’s recent hawkish dot plot shift has opened up immediate dollar strength and sent global stocks lower on policy normalisation fears. However, this last week saw a gradual weakening of the USD and strength coming back into global stocks. Why? The market digested the fact that interest rates are not expected to change any time soon (at least until2023). As a result, low interest rates and the large US stimulus package means that global stocks can keep rising, for now at least. However, many investors are very nervous at equities at these levels and are asking when will the inevitable correction come?
Other key events from the past week
- EUR: Strong German PMI’s, June 23: Flash German PMI’s showed the steepest rise in new business since 2011 and the improvement was mainly driven by the services sector. This is a good sign for the eurozone’s economic rebound.
- Bitcoin: Tests $30,000, June 23: The People’s Bank of China is actively discouraging crypto investments and this negative sentiment for crypto traders resulted in the $30,000 level being tested this week. However, buyers strongly defended the level and a re-test of $40,000 is technically possible again.
- GBP: Interest Rate Meeting, June 24: The GBP appreciated into the BoE meeting with markets expecting a hawkish tilt. The meeting delivered a firm ‘hold’ that sent the GBP immediately lower as the BoE took a cautious stance.
Key events for the coming week
- Oil: OPEC Decision, July 01: US oil has been moving higher through $72 on rising oil demand despite OPEC+ pondering a 500K bpd hike in August. The Bank of America thinks US oil can still reach $100 this year on strong fundamentals. Register for our free trading webinar to get your plan for the week ahead.
- USD: Employment data, July 02: The Federal Reserve want to see strong employment data before normalising US monetary policy. Will Friday’s NFP print be able to deliver the confidence that the Fed needs to taper bond purchases?