Central Banks’ Rate Decisions in the Spotlight, China’s Industrial Production Awaited
U.S. shares were mixed after the close on Friday. At the close in NYSE, while the Dow Jones Industrial Average jumped 0.42% to hit a new all-time high, the S&P 500 index and the NASDAQ Composite index fell 0.08% and 1.80%, respectively.
A slump in stocks of technology companies weighed down the overall performance after Goldman Sachs published a report that warns investors about the lofty valuation and low volatility of the top-five tech leaders which are Facebook, Amazon , Apple, Microsoft and Alphabet.
The dollar, however, advanced against most of its peers on Friday. The U.S. dollar index, which measures the greenback’s strength versus a basket of other six major currencies, closed 0.3% higher at 97.24 after hitting an almost two-week high of 97.47 earlier.
In the week ahead, investors will pay close attention at Wednesday’s Federal Reserve policy meeting, where the U.S. central bank is highly expected to raise its fed funds target range by a quarter point for the second time this year. The second rate hike will put interest rate in a range between 1.0%-1.25%.
Fed Chair Janet Yellen is scheduled to hold a 30-minute press conference after the release of the Fed’s statement. Market players will not turning their attention to the Fed’s chief tone about the economy or future rate hikes but also the central bank’s Fed’s plan to reduce its $4.5 trillion balance sheet later this year.
In addition to the Fed’s meeting, the U.S. calendar also features data on producer prices on Tuesday, inflation, retail sales on Wednesday, industrial production on Thursday and building permits, housing starts, consumer sentiment on Friday.
The British Pound was sharply lower against the dollar, sending the pair GBPUSD down 1.59% for the day after the close. The pair touched an eight-week trough of 1.2634 earlier following the shocking UK election result which added to political risks surrounding the upcoming Brexit negotiations, due to start on June 19.
A hung parliament was formed after British Prime Minister Theresa May’s Conservative Party unexpectedly lost its majority in parliament in a national election. Sterling paired some losses in U.S. session on the back of reports that May was seeking a deal to form a government with support from Northern Ireland’s Democratic Unionist Party, known as the DUP.
On Thursday, the Bank of England will announce its rate decision with analysts expecting no change in policy. The BOE said before the election that monetary policy would remain on hold for at least the next few months given the slowdown in consumer spending and the government’s plan on Brexit negotiations.
Before the BOE’s interest rate decision, traders will focus on monthly inflation data due to be released on Tuesday and Average Earnings Index out on Wednesday. Also on Thursday, the U.K. Office for National Statistics will publish Retail Sales figure for May which is expected to decline by 0.9% on a monthly basis.
Besides monetary policy meeting of FOMC and BOC, Thursday also features The Swiss National Bank’s quarterly monetary policy assessment. Markets anticipate the central bank’s benchmark interest rate to remain unchanged at -0.75%.
On Friday, the Bank of Japan will complete the quartette of central bank’s rate decisions. The Japanese central bank is forecast to keep its monetary policy unchanged at minus 0.1%, while holding the 10-year government bond yield target at around 0%. The net amount of Japanese government bonds that the BOJ buys annually at around 80 trillion yen is also expected to be held intact.
BOJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision.
The China National Bureau of Statistics is to release data on the country’s industrial production for May on Wednesday which is expected to rise 6.3% last month following an increase of rise 6.3% last month. Data on fixed asset investment and retail sales will also be published at the same time.