Undoubtedly, the most important event of the week will be the decision of the US Federal Reserve on interest rates. In addition, along with the decision, the latest macroeconomic projections of the FED will appear along with a press conference.
On the market more and more are being talked about the possibility of cutting interest rates in the US in July by as much as 50 basis points and possible subsequent cuts later in the year. All this due to deteriorating data from the American economy. The last reading of PMI, ISM, labor market data regarding employment growth or average hourly earnings disappointed. Macroeconomic forecasts for the next years for the US indicate a slowdown, while the recession index calculated by the Federal Reserve from Cleveland increased to 35 percent. Investors are also afraid that if more tariffs are imposed on Chinese products, the US economy will not only slow down, but will start to shrink.
Market odds for interest rate cuts by FED on Wednesday increased to 30 percent, while the probability of cut in July is estimated at almost 90 percent. There were also opinions, according to which the Federal Reserve may surprise the market by cutting interest rates at the June meeting due to a strong decline in inflation expectations. It is the lack of inflation growth in the future and fears of a decline in GDP may be the main argument for the FED's decisions.
Nevertheless, there is also a chance that the monetary authorities will decide to wait for the G20 summit, during which the US and China may meet to resolve the trade conflict. This event may stop the FED from making a hasty decision and postpone it at the end of July.
In addition to the decision on interest rates in the US, which will take place on Wednesday 19 June at 20:00, it will also be worth paying attention to inflation from the euro zone - publication at 11:00 on Tuesday 18 June, as well as on the Bank of England 's decision on interest rates - June 20, 13:00. Recent statements of representatives of the Bank of England pointed to the possibility of raising interest rates faster than expected by the market together with the lack of the need to wait for brexit developments. From this point of view, the communication of the Bank of England with the market will be important.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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