Weekly Market Update 23 July – ECB stands firm on its dovish stance, FOMC in focus next week
Weekly Market Update 23 July – ECB stands firm on its dovish stance, FOMC in focus next week
1. The greenback outperformed most of the major currencies, aside from the Canadian Dollar. In the recent meeting on Wednesday, the Federal Reserve kept the target range for the federal funds rate steady between 0 to 0.25 per cent. Looking ahead, investors will be keeping a close watch on the Federal Reserve monetary policy decision in the coming week, along with advance GDP estimate which should reflect US economic growth during the second quarter of the year. Elsewhere, the three major US indexes closed the week in record territory as concerns regarding the spread of the Delta variant of the virus took a backseat, with strong earnings results from a few companies. As we enter the busiest phase of the earnings season in the coming week, investors will turn their attention to earnings reports from firms such as Apple, Facebook, Microsoft, Alphabet and Amazon.
2. Across the Atlantic, Euro whipsawed before paring recent gains, following the European Central Bank’s (ECB) monetary policy announcement which echoed a strong dovish stance as they steered clear of any taper talks and adopted a higher inflation tolerance level. Looking ahead, Euro could extend its decline against other major currencies as the ECB made it clear that there will be no tapering plans with the Delta virus variant posing uncertainty to the economy. On the data front, the Eurozone will be publishing their preliminary estimates of second-quarter GDP, inflation rates and jobless data along with Germany and Italy business and consumer sentiment.
3. Other high impact data releases include Australia’s second-quarter CPI, New Zealand’s trade balance and building permits, as well as Canada’s GDP and CPI data. Keeping in mind that half of Australia’s population is in lockdown as they battle the spread of the virus, there is a risk that the Reserve Bank of Australia could backpedal its previous decision to taper asset purchases or adopt a more cautious outlook in August, thereby putting the Aussie under pressure. Overall, the strategies were assisted by the volatility which saw the trades benefited from robust price movements.
