FUNDAMENTAL REVIEW FOR THE WEEK (17 - 21 June 2024)

The past week on the foreign exchange market was mixed. Before the Fed meeting on Wednesday, risk assets were strengthening against the backdrop of a consistent decline in consumer prices in the United States over recent months. Trading participants expected that the Western regulator would now change its monetary policy to a more dovish one - with more rate cuts this year.

However, during the speech of FOMC Chairman Jerome Powell, it turned out that the balance of power within the committee was almost equal - 8 Fed members were in favor of 2 rate cuts, 7 Fed members were in favor of 1 rate cut, and 4 Fed members were in favor of no rate cut this year. There is no clear emphasis in favor of loose monetary policy. This rather cooled the ardor of risk buyers and allowed the dollar to quite seriously restore its position in the foreign exchange arena.

The coming week will be marked by quite a large number of speeches by Fed members, economic reports and central bank meetings.

Most of the FOMC representatives' speeches will take place during the American sessions on Monday and Tuesday; It would be nice to hear their positions on the likelihood of a rate cut in September, of course, with the standard caveat: “if inflation data for the coming months does not disappoint.”

The US retail sales report on Tuesday is important due to investors' concerns about the risks of a recession: an overtly weak report could lead to a flight from risky assets due to fears that the Fed is late in cutting rates, while a too strong report, on the contrary, will increase the likelihood that that the interest rate will not be reduced until the end of the year.

The best option for the USA is if retail sales reach the area of ​​low growth rates, i.e. close to or slightly below the forecast.

It is also worth paying attention to the report on weekly applications for unemployment benefits in the US on Thursday. The growth of this indicator, coupled with a good report on retail sales, will increase risk appetite as the dollar falls.

Meetings of world central banks will also take place this week. According to Neomarkets, the Central Bank of Australia (on Tuesday), China and England (on Thursday) will keep rates unchanged.

But here it is worth keeping in mind that the UK inflation data published on Wednesday may affect the decision of the Bank of England and the commentary of its chairman Andrew Bailey.

Good luck and informed investment decisions!