Market Overview

5 Critical Events In 50 Hectic Hours - Everything You Need To Know

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This article originally appeared on FXStreet.

  • The week of June 11-15 is packed with top-tier regular and irregular events.
  • These 5 events are set to rock financial markets and they are condensed in 50 hours.

Here goes:

1) Trump-Kim Historic Summit

Tuesday, 1:00 GMT. If there are no last-minute surprises, US President Donald Trump will shake hands with North Korean Leader Kim Jong-un in Singapore on June 12th at 1:00. The historic Summit comes only a few months after the leaders exchanged threats and insults. Tremendous efforts from South Korean President Moon Jae-in and other factors brought the North Koreans to offer denuclearization in return for safeguarding the regime. The leaders of both Koreas met twice in preparation for this event.

The big open question is: will North Korea agree to a process of abandoning its nuclear weapons in a verifiable manner? A lot depends on the personal chemistry and not only the details. Negotiations are going on to ensure success, but suspicious minds on both sides may jeopardize the efforts.

Success would mean signing a roadmap for peace, denuclearization, and perhaps Kim visiting the White House. It would trigger a risk-on atmosphere that would be good for stocks and risk currencies. The USD would lose to all currencies apart from the yen.

A failure would mean no agreement or even an abrupt breakup of the talks. This would send stocks down, the yen surging and the US Dollar following suit.

2) US inflation report

Tuesday, 12:30 GMT. The US publishes its Consumer Price Index report for May on Tuesday. The all-important Core CPI stood pat at 2.1 percent YoY in April, falling slightly short of expectations and disappointing the US Dollar. After picking up in April, another stall in CPI inflation resulted in the Core PCE, the Fed's favorite measure,  remaining below 2 percent. This fresh inflation report comes just before the Fed decision and could have an impact on the tone.

Any acceleration could boost the greenback while a repeat or a slowdown may weigh on it. It will also have a wider impact on markets that prefer lower inflation and looser monetary policy. A bump up in prices and the consequent rate hikes could hurt markets while another easing could cheer equity markets.

3) Fed decision

Wednesday, 18:00 GMT. The Fed is set to raise the interest rate on Wednesday. The FOMC Meeting Minutes from the May meeting consisted of the words "it will be appropriate to raise rates soon," leaving no room for doubts. The hike is in line with interest rate projections in March, which pointed to a total of three rate hikes in 2018. The question is: will they upgrade the dot-plot to a total of four increases? Or will they hint that the next increase will have to wait for December? 

At the moment, it seems that they will adopt a more cautious approach and leave the dot-plot unchanged. If they later wish to raise rates in September, they will still have sufficient time to convey such a message. However, a hawkish shift could come from the dropping the guidance about accommodative monetary policy. FOMC members Brainard and Williams alluded to it in speeches just before the blackout period. Such a change in language could lift the greenback. Apart from the statement and the forecasts, Fed Chair Jerome Powell will hold a press conference. Reporters will likely hone in on Powell if the forward guidance is changed. 

4) ECB Decision

Thursday, 11:45 GMT. The European Central Bank is set to announce the beginning of the end of its bond-buying scheme. They are expected to stop bond buying by the end of the year. Any delay will weigh on the euro while an optimistic message will send it higher.

Yet the event in the 19-country bloc has wider implications. If Europe is finally experiencing higher inflation after a long period in dire straights, prices may rise all over the world. This could scare markets, especially if the Fed also goes hawkish on the previous day. If they provide more liquidity for longer, markets could cheer.

More: ECB Preview: The time is right to set the end-date for asset purchasing

5) US Retail Sales

Thursday, 12:30 GMT.  The activity of consumers is always a top-tier figure but may have less of an impact on the Fed, especially if they keep markets puzzled on language changes. Nevertheless, the focus of the Retail Sales report is in Control Group which grew by 0.4 percent in both April and March. Any faster growth would boost the USD while a worse figure could weigh on it.

As this is last top-tier indicator for the week, it could have the final say on all markets. 

These are the five big events but there is one big elephant in the room: Donald Trump. The growingly isolationist stance of the US President threatens global growth and this is an ongoing concern. 

While there is no planned event related to trade, anything can come out of the White House.

Posted-In: FXStreetNews Eurozone Forex Treasuries Federal Reserve Markets

 

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