The focus in the coming week will be on central banks with the Fed, BOE and BOJ policy decisions on tap. A side note on the Nasdaq: tech shares tumbled Friday after a Goldman Sachs report pointed out that Facebook, Amazon, Apple, Microsoft and Alphabet may be facing a valuation air pocket. Alongside this, BAML reported that the tech sector is now the most overweight it has ever been and even surpassed the position overloading prior to the “dot com crash” in 2001. The Dow didn’t follow suit as bank shares cheered the bill to gut the Dodd-Frank act.
USD: It’s all about FOMC (Wed) and we will probably have another dovish hike if the Fed is truly data dependent, given the uncertainty surrounding the Trump trade and inflation expectations. On the same day as the Fed, CPI and retail sales for May are unlikely to influence the meeting’s outcome, but will enhance the market’s forward expectations.
EUR: Macron’s looks set to win the first round of parliamentary elections with a landslide and if forecasts are correct, he might obtain one of the biggest majorities in nearly fifty years. This will no doubt be a focal point for the Euro in the coming week alongside Ger ZEW (Tue), employment and ind.prod. (Wed), and inflation data (Fri).
GBP: the GBP will likely continue to jump around, as the market decides just how negative the surprise UK election result is for the UK economy and the GBP. The bear case is more compelling given the political and economic uncertainty. Data will also have an impact in the coming week with UK CPI and PPI (Tue), UK employment (Wed), Retail Sales & BOE (Thur).
AsiaPac: China Retail Sales & Ind. Prod. (Wed) will influence the AUD alongside domestic data prints: NAB Business Survey (Tue) followed by employment data (Thur). RBA’s Debelle also speaks this week. New Zealand’s Q1 GDP report (Wed) may post quickened growth. Finally we enter the BOJ (Fri): the debate is whether the central bank is lessening bond purchases in a mini-taper of sorts. CPI wouldn’t justify this stance at all.
Going into the week, I remain bullish on Dow, bearish on Crude & Gold. I remain bullish on Nzd & Aud vs. GBP, USD and EUR. As usual, updates will be available daily in the Cause & FX note.
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Justin Paolini is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.