G7 Probes China Over Virus

The Federal Reserve’s Open Market Committee meeting is the most important event in the week ahead. It is not that it will take fresh policy action. Rather, its observations about the economy and its forward guidance are the focus. Since the Fed last met in April, job growth has slowed, and prices have accelerated.

While the outcome of the Fed meeting will take the limelight investors will also be looking closely at data on U.S. retail sales and producer prices for an update on the strength of the economic recovery. China is to publish data on industrial production and retail sales for May on Wednesday. In the UK, Prime Minister Boris Johnson will decide Monday whether to delay the full economic reopening planned for later this month. Here is what you need to know to start your week.

Here are the key market moving factors for the week:

The US

• Job growth averaged 661k a month in Q1 but slowed to 419k in April and May. Other labor market metrics, like the weekly initial jobless claims, continue to trend lower. The four-week moving average used to smooth the volatility has fallen to 402k, half of what it was at the end of February. Other labor market metrics, like job openings, suggest improvement will continue.
• One of the great partisan debates is over the role of federal unemployment compensation in shaping the incentive structure and the decisions about returning work. Nearly half of US states, all led by Republicans, will be terminating access to the federal government’s $300 a week supplemental unemployment compensation and programs that cover gig workers and long-term joblessness.
• The federal program is not set to expire until early September. Missouri, Mississippi, Alaska, and Iowa terminated access Saturday (June 12). Another nine states join the following week (June 19), followed by eight states (June 26). After that, four more states reject federal unemployment assistance over the following three weeks.
• Away from Fed meeting, the U.S. is to release May data on retail sales and producer price inflation on Tuesday.
• Also out on Tuesday is industrial production data which will be closely watched amid issues over supply constraints and labor market shortages. This could translate into increases in producer price inflation.
• The economic calendar also features reports on housing starts and initial jobless claims. Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months as the reopening continues.

The UK

• The Pound has finished the week relatively unchanged with GBP/USD fluctuating in a tight range throughout. Thursday’s pullback ahead of the US CPI data was rejected at 1.4075 an area that had offered support previously in May. The pair has ventured towards this level a few times over the last month so there does seem to be some sort of pull to bring the pair lower in the short term, given how bullish attempts have been rejected consistently at the 1.42 mark.
• British Prime Minister Boris Johnson is due to announce on Monday whether the lifting of England’s last remaining lockdown curbs can go ahead on June 21.
• But Johnson on Saturday expressed “serious concern” about rising infections of the Delta COVID-19 variant, first discovered in India, reinforcing expectations that he is set to delay a full reopening of the economy by two to four weeks.
• Britain on Saturday reported 7,738 new COVID-19 cases, down slightly from a day earlier, when they were the highest since February.
• The UK is to release data on inflation, unemployment and retail sales during the coming week, which are expected to point to an ongoing rebound in economic activity.

Europe

• European Union leaders will threaten British Prime Minister Boris Johnson with a trade war over Northern Ireland, The Times reported on Friday, without citing sources.
• German Chancellor Angela Merkel and French President Emmanuel Macron will use one-to-one meetings with Johnson on Saturday to demand that Britain honours the terms of the Brexit deal in relation to Northern Ireland, The Times reported.
• Downing Street said that Johnson would dismiss the EU’s threats and make clear he was ready to override a key part of the agreement this month unless the bloc backs down, The Times reported.

JAPAN

• The Bank of Japan’s meeting concludes on June 18. There have been modest policy adjustments that have had little impact and have drawn little attention. The BOJ has reduced its bond-buying, but no one has confused it with tapering.
• For the first time in eight years, the BOJ did not buy any equity ETFs for a month, and still, the Topix rose 1.3% in May. Without the BOJ’s bid, short-sellers may be emboldened. On the other hand, valuations are lower in Japan than in the US and Europe, and the economy is poised to recover in H2.

CHINA

• Group of Seven leaders on Sunday scolded China over human rights in its Xinjiang region, called for Hong Kong to keep a high degree of autonomy and demanded a full and thorough investigation of the origins of the coronavirus in China.
• After discussing how to come up with a unified position on China, leaders issued a highly critical final communique that delved into what are for China some of the most sensitive issues, including also Taiwan.
• The re-emergence of China as a leading global power is considered to be one of the most significant geopolitical events of recent times, alongside the 1991 fall of the Soviet Union that ended the Cold War.
• China is set to publish May industrial production and retail sales data on Wednesday, giving investors an updated insight on the economic outlook for the world’s second-largest economy.
• Both numbers are expected to slow from the previous month, as domestic consumption remains sluggish.
• While China’s exporters are enjoying strong demand, global supply chain bottlenecks and rising international commodity prices have weighed on production, acting as a drag on the strong recovery from last year’s pandemic induced slump.

Market Overview:

Gold

• Gold prices extended lower during Monday’s APAC session after falling 1.14% on Friday, as the US Dollar climbed alongside longer-dated Treasury yields. Demand for the Fed’s overnight reverse repo facility (ON RRP) surged to a record high of $547.8 million on June 11th.

Oil

• WTI crude oil prices are hovering around the highest since October 2018, closing at a new high for this year so far. The commodity could see volatility if tensions between the US and Russia worsen, increasing prospects of tougher sanctions between the two key oil producers. Joe Biden will be meeting Vladimir Putin in Geneva on Wednesday. What else is in store for markets?

Below are the major market moving events for the week:

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

Chat with us to know more: https://wa.me/971581958582

Register to open your account: http://bit.ly/OpenFxAccount

Join Our Telegram Channel: https://t.me/ForexFundManagers

Subscribe to Our YouTube Channel: https://youtu.be/AnTlQd-FQxc