Markets Week Ahead: S&P 500, Gold, USD; Fed, ECB, BoJ,

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Global equity markets rose to a 13-month high on improving sentiment following the recent suspension of the US debt ceiling, the resilience of the global economy, and hopes that US interest rates are peaking.

The MSCI All Country World index rose 0.6%, the S&P 500 index advanced 0.4%, and the Nasdaq 100 index was mostly flat. The German DAX 40 and the UK FTSE 100 slipped 0.6%. In Asia, the Hang Seng index advanced 2.3%, while Japan’s Nikkei 225 rose 2.2%. Risk-sensitive currencies, including the Australian dollar and the New Zealand dollar gained in the week.

Past week market performance

Source Data: Bloomberg; chart prepared in Microsoft Excel.

Note: Global Bonds proxy used is Bloomberg Global Aggregate Total Return Index UnhedgedUSD; Commodities proxy used is BBG Commodity Total Return; Hedge Funds proxy used is HFRX Global Hedge Fund Index.

While the overall data calendar in the past week was relatively light, the surprise interest rate hikes by the Reserve Bank of Australia and the Bank of Canada highlighted that inflation, while moderated at the headline level, remains well above the central banks’ target. This puts the spotlight on the US Federal Reserve, the European Central Bank (ECB), and the Bank of Japan (BoJ) meetings in the coming week.

The market is now pricing in around a 70% chance of a pause at the June 13-14 FOMC meeting, compared to 35% a week ago, after several Fed officials including the vice chair-designate pointed toward a ‘skip’ in June. However, it could be a close call, especially if Tuesday’s US CPI data comes in above expected. The market expects headline CPI to ease to 4.1% on-year in May from 4.9% in April; core CPI to stay flat at 0.4% on-month. Even if the Fed decides to pause in the coming week, Fed officials have made it clear that any decision to hold rates steady should not be viewed as the end of the tightening cycle.

The ECB is widely expected to hike its benchmark rate by 25 bps at its meeting on Thursday and again in July, but the BoJ could remain on hold. At its previous meeting in April, the BoJ maintained its ultra-easy policy given the uncertain outlook on the economy and inflation.

Besides the three central bank meetings, China’s new yuan loans data is due on Monday. Australia’s June Westpac consumer confidence, Germany’s May inflation and ZEW economic sentiment index, UK jobs, and US CPI data are due on Tuesday. UK GDP and manufacturing data for April, Euro area April industrial output, and US PPI data are due on Wednesday. The US FOMC meeting, the ECB meeting, Australia May jobs data, New Zealand Q1 GDP, China fixed asset investment and retail sales, and US industrial production and retail sales for May are due on Thursday. BOJ interest rate decision and US Michigan consumer sentiment data are due on Friday.

Forecasts:

Euro Forecast: EUR/USD on Thin Ice Before Fed Decision, ECB Unlikely to Tip Scales

US inflation data, the Fed’s interest rate decision and the ECB’s monetary policy announcement will take center stage next week and guide the EUR/USD’s near-term trajectory.

British Pound Latest – GBP/USD and EUR/GBP Highlight Sterling’s Strength

The British Pound is pushing through a level of prior resistance against the US dollar while EUR/GBP hits a low last seen in late August.

Australian Dollar Outlook: The RBA Delivers, Will the Fed?

The Australian Dollar continued to recover going into the end of last week after the surprise hike by RBA. The Federal Reserve now moves into view and might spur some volatility. ahead.

Gold Weekly Forecast: Gold (XAU/USD0 Prices Delicately Poised Heading into Blockbuster Week

A pivotal week ahead not just for gold prices but markets as a whole. Will the FOMC meeting see gold return to the $2000 handle or will the long-awaited retest of $1900 finally materialize?

Crude Oil Prices Look to US Data for Guidance as OPEC News Fades

Crude oil prices shift attention towards the US for short-term directional bias coming off a quiet week of trading.

S&P 500, Nasdaq Week Ahead: Tesla Drives US Stocks into a New Bull Market

Tesla’s deal with GM had the stock trading up 4.5% in the pre-market, powering the index into a new bull market. FOMC rate meeting and US inflation next week.

US Dollar Weekly Outlook: DXY Turns to Inflation Data and the Federal Reserve Next

The US Dollar weakened last week heading into critical inflation data and the Federal Reserve monetary policy decision. Will the central bank hint at further tightening after an expected pause?