Weekly trading forecast June 10 - 14

The second week of summer vacation season would not be that quiet as some of the investors considered as the financial markets enter into a decisive period when long-term trends are supposed to confirm their stable performance. Besides the geopolitical pressure over U.S-China trade talks, the monetary policy might start influencing assets in the market as lots of significant events are scheduled in the economic calendar for this upcoming week. The Federal Open Market Committee had already driven markets as a rate cut was announced, and global investors and traders will discuss possible consequences of such a sudden move by the regulator. Powell’s colleagues - Mario Draghi and Mark Carney - are going to speak this week as the market players are willing to get an official reaction from the European Central Bank and the Bank of England to Fed’s announcement. The Swiss National Bank is gathering for the interest rates decision this Thursday. A whole pack of crucial macroeconomic reports is scheduled to release in Great Britain, while traders will monitor earnings growth in the country. U.S. inflation could change the market’s sentiment in the light of interest rates cut if the figures were weak. Chinese data would show the situation in the second largest world’s economy. OPEC monthly report could affect a reversal in the downtrend for oil prices if producers were able to cut supply volume. The fixed-income market will be updating the current conditions for Treasury and Bond yields, as well as the cost of gold.

Monday’s Asian trading session does not promise to be too volatile as Australia, Germany and Switzerland are off for holidays, and the trading volume might drop compared to an average value. Japan will announce a revision of the country’s Gross Domestic Product, and economists predict a stronger reading than previously. Bank lending and Adjusted Current Account figures are due to release at the same time with the GDP headlines. China will publish an update for Trade Balance, Exports and Imports volumes, which might affect the emerging market's assets, including USD/CNH and other exotic currency pairs. At the same time, commodity currencies would also be vulnerable to the selling pressure if the data failed to meet the market’s expectations. In London, British GDP reports will be the main event for the Sterling on Monday, while manufacturing production and trade balance figures are also important. Canadian Housing starts and Building permits traditionally affect the BoC’s monetary policy, while the only significant event in the United States will be JOLT jobs openings report. USD/CAD could appear under more selling pressure if the fundamental environment remained the same as in the previous trading week.

The British Pound will be in the market’s focus on Tuesday as crucial reports will be published in the U.K., including Claimant Count Change, Average Earnings Index and the Unemployment rate. So far, analysts predict a slight improvement in the headline figures, but the forecasts still have a room for a positive surprise. GBP/USD edged higher last week, bouncing off multi-month lows on the back of U.S. dollar’s weakness across the board. However, the fundamental support could affect an even stronger appreciation of the currency pair. China’s New Loans and M2 Money Stock reports are essential for the GDP/depth ratio, which was concerning investors recently. The main event of the day will happen in the United States as traders will be monitoring the Producer Price Index. The market’s consensus is at the level of 2% year-over-year, which is exactly in line with the Fed’s inflation target. Any change on the lower side would increase chances for the FOMC to cut the interest rates as early as this summer. That could drive U.S. equities higher and the greenback lower.

Japan will release the Core Machinery Order, but the primary attention will be headed to China’s Consumer and Producer Price Indexes. The lack of internal consumption was the main trouble for the economic growth in the country, and weak inflationary pressure could only confirm that concern. USD/CNH is still hovering around the basic rate of 7 yuan for one dollar, and it could breach the historic resistance this Wednesday. French Non-Farm Payrolls and Spanish CPI will come it at the same time as Mario Draghi’s speech. EUR/USD could extend gains if the ECB President were not too dovish in his comments regarding the Fed’s announcement to ease the financial conditions. On the other side, if the ECB decided to impose mirror measures in terms of monetary policy, the pair could reverse and continue the downtrend. U.S. Core Consumer Price index and Crude Oil Inventories report - those are the drivers for the price action on Wednesday.

Australia will grab the markets’ attention on Thursday with employment data. The Aussie charted a lagging price action last week, and fundamental factors could become something to lift the currency higher. However, the Reserve Bank of Australia already announced a series of rate cuts this year, and the differential is not in favour of AUD/USD yet. The Swiss National Bank will announce the interest rates decision right after the CPI report, while the press conference will start in 2 hours from then. Analysts do not expect the regulator to make any changes in the monetary policy, and the Swiss Franc strengthened versus the U.S. dollar mainly because of the overall market’s sentiment to sell the greenback. But the SNB officials’ might try to verbally intervene as the too low exchange rate of USD/CHF could hurt local exporters. European Industrial Production and German CPI - those are the key events in Europe. U.S. Export and Import Price Indexes will conclude the series of inflationary reports this week.

China will release Industrial Production, Fixed Assets Investment, Retail Sales and Unemployment Rate. French and Italian CPI figures will be released right before the EU Finance Minister’s meeting, so traders should monitor headlines in terms of possible announcements regarding the TLTRO programme in the EUrozone. EUR/USD would be vulnerable to higher volatility on Friday. U.S. Retail Sales will become the main event for the greenback and stock indices as the last week’s data were optimistic for the risk appetite. If the report confirmed the strength of the U.S. economy, while the Federal Reserve imposed another round of supportive measures, then we’d see equities soaring to all-time highs.
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