With lots going on in the markets, here is a summary of what to expect in the coming week:
- Interest Rate Decisions:
- The Federal Reserve (Fed) is expected to raise its borrowing costs by 25 basis points to 5.25%-5.50% at the conclusion of its July meeting. The focus will be on the Fed’s forward guidance, which may impact the U.S. dollar and risk assets depending on its hawkish or dovish tone.
- The European Central Bank (ECB) is also forecast to deliver a quarter-point hike, but it may sound cautious about further tightening due to the eurozone’s growth concerns. This could result in a potential bearish reversal for the euro.
- The Bank of Japan (BoJ) is expected to maintain its policy settings unchanged, but any hints of future accommodation withdrawal could lead to a strong rally for the Japanese yen.
- Economic Calendar Highlights:
- Traders will closely monitor the second-quarter U.S. GDP report and June PCE data to assess the health of the U.S. economy and its impact on inflation. Higher-than-expected results may signal the possibility of additional Fed tightening.
- Earnings Season:
- Technology companies like Microsoft, Alphabet, and Meta are expected to announce quarterly results. Their performance will be closely scrutinized to justify premium valuations and sustain the rally in tech stocks.
- Currency Forecasts:
- The British Pound (GBP) has seen mixed performance against other currencies, with GBP/JPY moving higher despite lower inflation data.
- The Australian Dollar (AUD) has struggled to gain ground due to US Dollar fluctuations.
- The Japanese Yen (JPY) weakness has continued, but possible FX intervention talk by Japanese officials could influence its direction.
- Commodity Forecasts:
- Gold and silver prices have disappointed traders, and their outlook remains uncertain.
- Crude oil prices will be influenced by US economic data, particularly the FOMC meeting.
- Euro Forecast:
- The EUR/USD and EUR/GBP outlooks will be tied to the monetary policy announcements of the Fed and ECB.
- US Dollar Forecast:
- The US dollar has seen a resurgence, and Federal Reserve Chairman Jerome Powell’s remarks may impact its future direction.
- Equity Market Forecast:
- US equity indices, such as the S&P 500 and Nasdaq 100, have been reaching year-to-date highs. However, extreme optimism, overbought conditions, and earnings performance could pose minor setback risks.
Overall, the upcoming week is likely to see increased volatility across markets due to central bank decisions, economic data releases, and earnings reports. Traders and investors should closely monitor these events to make informed decisions.
