It’s a Fed-focused week, as Jerome Powell and his FOMC friends post their latest statement – but will it keep June’s rally going?
US: Interest rates to remain unchanged?
Powell has repeatedly made it clear that the Federal Reserve still has plenty in the tank, attempting to reassure investors that the central bank’s arsenal is far from depleted. However, analysts seem to think that the Fed won’t unleash any more ammo on Wednesday; instead it is set to keep rates unchanged at 0-0.25 basis points.
What should be more illustrative is the return of the Summary of Economic Projections – projections that weren’t offered up as scheduled in March due to covid-19 preventing the central bank from putting together accurate forecasts.
The (likely dire) picture the Fed paints of the economy, and implicitly what it intends to do long-term to combat the downturn, could well inform how investors behave in the second half of the week. Though it may take a significant announcement to move the markets from what is already priced in.
Alongside the Fed come the great unknowns. That being any vaccine news, an escalation in tensions between the US and China (a situation that is far from over despite the market’s optimism), or the domestic situation in America (though that latter issue has proven to be of troublingly little interest to investors).
As for data, the JOLTS job openings reading is on Tuesday, the latest inflation numbers on Wednesday, the usual unemployment claims – which finally fell under the 2 million mark last week – on Thursday, and the preliminary consumer sentiment estimates on Friday.
UK: April GDP numbers on Friday
The UK hasn’t got a lot going on data-wise this week. That is until Friday, where investors get a bucketful.
The monthly GDP reading for April is the most important number. The figure for March – remember, which was only half impacted by lockdown – saw a contraction of 5.8%, lower than the 7.9% forecast by a huge slide from February’s -0.2%. Given that some estimates have the UK contracting by 30% in the second quarter, April’s reading could be UGLY.
Joining the GDP data are the manufacturing production, industrial production and goods trade balance figures for April.
Eurozone: Economic data
In terms of Eurozone data this week, there’s the German industrial production number on Monday, a region-wide revised GDPM reading on Tuesday, Italian industrial production on Thursday, and the region-wide industrial production figure on Friday.
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