Market Review: May Federal Open Market Committee Meeting Minutes
Economic calendar (highest volatility): 21st May– 25th May 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
In the previous week, the U.S April 2018 Retail Sales release recorded lower at 0.3% (Forecast: 0.5%). Despite this, the United States Dollar (USD) still remained resilient as indicated by the Dollar Index (DX) which continued to rise from the 92 level up to the 93 level at the end of the week. The team here at FintechFX strongly notes that the United States (U.S) Federal Open Market Committee (FOMC) are well on track to implement further Interest Rate hikes as guided by the previous weeks April 2018 U.S Core Consumer Price Index (CPI) release. The April 2018 CPI release continued to indicate that inflation levels are holding well above the target 2% mark. At the start of the year, U.S Federal Reserve Chairman Jerome Powell indicated that the FOMC could see as many as four Interest Rate hikes this year. In the last FOMC meeting held earlier this month, the benchmark U.S Interest Rate was left unchanged. This indicates for a stronger possibility of an Interest Rate hike to take place during the June 2018 FOMC meeting as inflation levels continue to pace ahead of the 2% mark. Nonetheless, we note that U.S President Trump's ‘protectionist’ stance and hovering 'geopolitical' issues stand to deter our views. Formerly, U.S President Trump signed a memorandum imposing wide-ranging tariffs of up to U.S$60 billion on China; following previously imposed tariffs on steel and aluminium imports. China has since retaliated with the introduction of it's own tariffs on imports of 128 U.S products. Following this, U.S President Trump further rattled markets by announcing the possibility of an additional U.S$100 billion worth of tariffs to be imposed against China. There is now fresh speculation for U.S President Trump to revive the Trans-Pacific Partnership (TPP) to enact further pressure on China. Meanwhile, U.S President Trump is scheduled to meet North Korean President Kim Jong-un in Singapore this 12th June 2018.
This week, the team here at FintechFX views the U.S 2018 Federal Open Market Committee (FOMC) Meeting Minutes release to bring about the most volatility. There is strong precedence for a spark in volatility which sometimes could lead to a change in trend as viewed during former FOMC Meeting Minutes releases. The team here at FintechFX foresees that this could also be a possibility this week. In addition to this, the team also picks out the Great Britain Pound (GBP) to be a key volatility driver for the week given the series of country specific economic data due for release this week namely it's April 2018 CPI, February 2018 Retail Sales, First Quarter of 2018 (Q1) Gross Domestic Product (GDP), and Inflation Report Hearings. Meanwhile, the European Central Bank (ECB) will also be releasing their latest Monetary Policy Meeting Accounts this week.
The GBP/USD has recouped much of its post-Brexit losses however, has been falling down again since mid-April after failing to break a strong multi-year resistance line. Nonetheless, The BoE has cautioned that akin to the U.S, the BoE may also raise Interest Rates faster than expected. This statement will be further scrutinized this week as we approach a series of economic data releases out of the United Kingdom (U.K). The team here at FintechFX views that at least the "sell on rumour" move seems to be holding strong for now as indicated by the strong downward movement shown in chart below. This downward move sparked out when it was made known that the majority of the BoE's key committee members still do not favour an Interest Rate hike this May 2018. The team at FintechFX view that a 'buy on fact' move should commence for the GBP/USD as we approach BoE's next Interest Rate decision date as there is now increased likelihood for an Interest Rate hike to take place.
This week, the EUR/USD will certainly be subject to some degree of volatility given the pending Monetary Policy Meeting Accounts which is scheduled to be released sometime towards the end of the week. The team here at FintechFX finds the strong Fibonacci level of 38.2% which is also a multi-year support level (as indicated in the chart below) of particular interest this week as there still is yet to be any corrections viewed following the strong downtrend for the EUR/USD.
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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