S&P 500, Gold, US Dollar; US ISM, Euro Area Retail Sales, RBA, Japan Econ Watchers, China Inflation

By Investor Empires On Jun 4, 2023

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Trend trading basics

Global stock markets rose, buoyed by solid gains in US stocks, as markets welcomed the passage of a debt ceiling bill that averted a catastrophic default in the US. Debt negotiations in Washington have been a major focus for markets in recent weeks, and passage of legislation that raises the government’s debt ceiling to $31.4 trillion removes major uncertainties.

The S&P 500 rose 1.8%, while the Nasdaq 100 rose 1.7%. Germany’s DAX 40 advanced 0.4% while Britain’s FTSE fell 0.2%. In Asia, the Hang Seng advanced 1.1%, while Japan’s Nikkei 225 advanced 2.1%.

Market performance in the past week

Source data: Bloomberg; The graph is prepared in Python.

In addition, US data has been better than expected in recent weeks, according to the Economic Surprise Index. Nonfarm payrolls grew much more on Friday than expected in May, indicating tighter labor market conditions. However, with the US Federal Reserve expected to pause rate hikes, inflation easing in recent months, and economic growth showing signs of resilience, stocks appear to be in a good position.

The market now has a 74% chance of being stalled at the June 13-14 FOMC meeting, compared to 35% a week ago, after several Fed officials including the vice chair-designate indicated a “skip” in June. “Skipping a rate hike at an upcoming meeting would allow the committee to see more data before making decisions about how firm the additional policy will be,” Vice Presidential nominee Philip Jefferson said earlier in the week. However, he added, any decision to keep interest rates steady should not be seen as the end of the tightening cycle. Fed Chair Powell left the door open earlier in the month to pause at the June meeting.

Next week, the US ISM Services PMI for May will be released, along with the China Caixin Services PMI for May on Monday. The RBA interest rate decision and retail sales in the eurozone are due on Tuesday. On Wednesday, RBA Governor Lowe’s speech and Australian GDP for the first quarter are scheduled. Japan’s first-quarter GDP and Environmental Watchers survey, and the eurozone’s first-quarter GDP on Thursday. China’s inflation data for May is due on Friday.

Forecasting:

Euro Weekly Outlook: EUR/USD ends the week on a high but the recovery is still in place

A somewhat disappointing week overall as EURUSD in particular struggled for direction while the EUR lost ground against both the British Pound and the Japanese Yen. Given the lack of catalysts ahead, is there any reason to expect the EUR to halt its slide?

British Pound Next Week: GBP/USD, EUR/GBP and GBP/JPY Forecasts

The British Pound enjoyed a strong week against a range of currencies, supported by expectations that UK interest rates will rise further.

Australian Dollar Outlook: RBA may surprise doves

The Australian dollar recovered from a new low last week with the US dollar bouncing due to the debt ceiling decision, but the Reserve Bank of Australia may play a bigger role next week.

USD Weekly Outlook: DXY heads to Wall Street as the economic agenda calms down ahead

The US dollar took a breather last week, as the labor market continued to tighten leaving the door open for the Federal Reserve to resume tightening in July. The lack of major economic data ahead puts DXY’s focus on Wall Street.

Gold Price Forecast: Dreams of setting new records are now shattered with the bears on the rise

The outlook for gold is starting to turn more bearish from a fundamental standpoint, as the resilience of the US economy may prompt the Federal Reserve to continue raising interest rates later this year.

S&P 500, Nasdaq next week: US stocks rise despite jobs data outperforming

US stocks headed into the weekend buoyed by a more dovish Fed, debt ceiling agreement and hourly constant average earnings. However, signs of overheating appear