The DXY – dollar index fell in early Monday trading, weighed down by a surge in risky currencies, although it remains close to its three-and-a-half-month high set last week.
The broader increase stays unchanged, with sustained sideways trading regarded as a plausible scenario ahead of this week’s Fed policy meeting and US GDP data. The market anticipates a more hawkish position from the Fed, as well as a shift in verbiage, signaling the start of the gradual reduction of monetary support, which may happen as early as this year.
The DXY was also bolstered by a quickening US economic recovery, which would influence the Fed’s decision. The economy increased at an annual rate of 8.6% in the second quarter, compared to 6.4 percent in the first. This week, investors will be looking for earnings reports from several S&P 500 businesses. This could affect market tone.
Market Events: FOMC and Q2 GDP
The FOMC meeting on Wednesday will be the center of central bank attention this week. Will it is a repeat of Fed Chairman Powell’s semi-annual testimony to Congress, or will hawks members be able to persuade him that the labor market has made “additional considerable improvement” and that tapering can begin soon? With tech titans FB, AAPL, MSFT, AMZN, and GOOGL reporting earnings this week, earnings will be front and center.
The question will be when the committee will inform the markets that tapering is imminent. Markets will know well in advance before tapering begins, according to Fed Chairman Powell. Powell stated in his most recent testimony that the job market has not made “additional meaningful improvement” to justify tapering. He said in March that there would have to be a streak of positive months of statistics. As a result, while June’s Non-Farm Payroll print was +850,000, May’s revised print was only +583,000 (weaker than expected), and April’s print was only +266,000. (much weaker than estimated). This week, the US will report Core PCE, which is widely regarded as the Fed’s preferred indicator of inflation (although not until Friday, after the FOMC meeting.)
The term “month-end data” refers to information collected at the end of the month. Not only will the FOMC meet this week, but there will be a slew of other economic data items to keep an eye on. We’ll expect releases of US, German, and Eurozone Q2 GDP, as well as German Unemployment Change, Australian CPI, and US Core PCE.
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Last Updated: July 26th, 2021
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