Highlights of the coming week
Market expectations that Fedrezera may soon begin discussions on reducing the volume of the asset buyback program are increasing. Last week, several Fed representatives announced their readiness to support this initiative at once. Against this background, investors have changed their attitude towards the dollar. On Friday, the dollar index updated its 8-day trading maximum.
In the coming weeks, investors will closely monitor the publication of statistics on the labor market and inflation, which have the strongest impact on Fed policy. Further growth in inflationary pressure and strong labor market data will increase expectations of an earlier start in the process of tightening monetary policy by the Fed. This may lead to a strengthening of the American currency.
Australia - RBA Meeting
The Reserve Bank of Australia continues to pursue a softer monetary policy to further stimulate economic recovery. This month, more stringent quarantine measures were reintroduced in some regions of the country due to a local outbreak of the virus. Against this background, the RBA is likely to maintain a soft tone of statements and leave the main parameters of monetary policy unchanged.
But you should not rule out surprises. Last week, the RBNZ hinted at the possible normalization of monetary policy in the 2nd half of 2022. The RBA may follow suit. In this case, the Australian dollar can significantly strengthen against the main competitors.
Germany - Manufacturing Sector PMI Data
In April and May, Germany's manufacturing PMI reached a historic high amid improved epidemiological conditions and prospects for the recovery of Europe's leading economy. But the indicator cannot be held at these levels for a long time. Preliminary data released earlier this month showed that the PMI is gradually moving away from highs. For the month, the indicator decreased from 66.2 to 64.0 points.
Most likely, the actual values of the indicator will come close to the forecast values. In this case, their impact on the dynamics of the euro movement will be insignificant.
US - Labor Market Report
The US labor market report will be a key event of the coming week. This is one of the main indicators that affects Fed policy. Recently, expectations have intensified in the market that Fedreserv may soon begin to curtail stimulus measures.
Interim data indicate that the labour market continues to recover from the crisis. Therefore, next week the market expects strong data. Experts predict a decrease in the unemployment rate from 6.1% to 5.9%, and an increase in the number of employees by 700 thousand. If actual values confirm forecasts, the dollar could significantly strengthen against major competitors.