Investing.com – In what is set to be a busy week, the Federal Reserve’s latest interest rate announcement will dominate trader’s attention amid expectations that the central bank could flag plans to ease monetary policy.
The Fed will deliver its decision on Wednesday, with most economists expecting no change, but persistent worries over economic fallout from the U.S.-China trade war could prompt the Fed to open the door for a rate cut later this year.
Investors will also be looking at central bank meetings in Europe, the U.K. and Japan, as well as the latest trade developments and economic data.
The dollar index climbed to its highest in almost two weeks on Friday after encouraging retail sales data for May eased fears that the U.S. economy is slowing sharply.
The dollar index against a basket of currencies was last 97.540, up 0.56% on the day and the highest since June 3.
The dollar has recovered in the last week from a weak start to June, as investors consider whether expectations for U.S. interest rate cuts have gotten too far-fetched relative to the data.
With international economic growth slowing, investors are nervous that U.S. President Donald Trump will impose tariffs on Japan and Europe, which could result in more dovish central banks globally and give the dollar a relative advantage.
The U.S. economy is also seen as better placed to handle trade tensions than other countries.
The dollar “has benefited to date from negative globalization news as the domestic side of the U.S. economy has looked sufficiently robust to deal with trade-related headwinds,” Morgan Stanley analysts said in a report on Friday.
“Other countries look less resilient in the face of trade tensions due to higher exposure to global import demand, dependence on manufacturing exports, and underdeveloped domestic demand,” they said.
Chinese data on Friday flashed more warning signs, with industrial output growth unexpectedly slowing in May to a more than 17-year low and investment cooling, underlining a need for more stimulus.
The other major catalyst for the dollar in the near term is whether the United States and China will renew trade negotiations at the G20 summit on June 28-29.
Trump said on Friday it didn’t matter if Chinese President Xi Jinping attends the summit, adding that China would eventually make a trade deal with the United States.
The dollar ended higher against the euro on Friday, with EUR/USD down 0.6% at 1.1207.
It was also higher against the yen, with USD/JPY up 0.17% to 108.54 in late trade.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, June 17
NY Empire State Manufacturing Index (Jun)
U.S. NAHB Housing Market Index (Jun)
Tuesday, June 18
China House Prices (May)
German ZEW (Jun)
Eurozone CPI (May)
U.S. Building Permits; Housing Starts (May)
Wednesday, June 19
U.K. CPI (May)
Federal Reserve Rate Statement, Press Conference
Thursday, June 20
Bank of Japan Rate Decision
Bank of England Rate Decision
U.S. Initial Jobless Claims
Philly Fed Index (Jun)
Friday, June 21
Eurozone PMIs (Jun)
U.S. Manufacturing PMI (Jun)
U.S. Markit Composite PMI
U.S. Services PMI (Jun)
U.S Existing Home Sales (May)
–Reuters contributed to this report