What a week! For the first half, the markets lived with the attempted assassination of the former US president. Just when it seemed that nothing stronger would happen, on the night of Thursday to Friday we experienced the first ever global Microsoft ‘blackout’. The failure demonstrated the fragility of modern technology systems and our dependence on one company, paralysing banks, stock exchanges, airports and causing chaos. Yesterday, we learned that the current US president is stepping down from running for re-election. His decision did not provoke a strong reaction in most financial markets, but there was noticeable movement in the cryptocurrency market, where the bitcoin exchange rate first fell by 2.5 per cent and then rose by 4 per cent. Investors can now focus on US foreign policy, particularly Donald Trump's protectionist practices. His statements caused the iShares Semiconductor ETF to fall by 11.5 per cent and the Nikkei 225 index by 7 per cent. Joe Biden's decision is positive for emerging markets, and the lack of a strong reaction is due to earlier speculation and anticipation of the nomination of Kamala Harris. After Biden's poor performance in the pre-election debate and the sweep of the Republican candidate, the odds of Trump's return rose from 52 per cent to 69 per cent, but Harris' endorsement lowered them to 60 per cent. This week we will know the Bank of Canada's interest rate decision and GDP and PCE inflation readings from the US.
Table of contents:
- Canada's interest rate decision
- US gross domestic product (GDP) annualised (Q2).
- US consumer spending index (PCE) annualised (June)
Wednesday, 24.07, 15:45 CET, Canada's interest rate decision
The Bank of Canada cut its main interest rate by 25 basis points in June, to 4.75 per cent, and signalled further reductions if inflation falls as expected. Inflation currently stands at 2.7 per cent, and the bank is confident that disinflation is approaching the 2 per cent target.
The current analyst forecast is for interest rates to remain at 4.75 per cent.
Source: Tradingeconomics.com
A higher-than-expected interest rate could be bullish for CAD, while a lower-than-expected interest rate could act bearishly on CAD.
Impact: EUR/CAD, USD/CAD
Thursday, 25.07, 14:30 CET, US gross domestic product (GDP) annualised (Q2).
The US economy grew at an annualised rate of 1.4 per cent in Q1. Investment was revised upwards to 4.4 per cent, with increases in structures, equipment and intellectual property products. Residential investment rose above expectations to 16 per cent, exports rose 1.6 per cent and imports were revised downwards to 6.1 per cent. Government spending was revised upwards to 1.8 per cent, while consumer spending slowed to 1.5 per cent, with declines in consumption of goods and services.
Analysts' current forecast is for GDP to grow to 2 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the USD, while a lower-than-expected reading could be bearish for the USD.
Impact: EUR/USD, USD/PLN, US500
Friday, 26.07, 14:30 CET, US consumer spending index (PCE) annualised (June)
The annual US PCE inflation rate fell from 2.7 to 2.6 per cent in May this year, which was in line with market forecasts. By comparison, the annual change in the US PCE price index has averaged 3.30 per cent since 1960, reaching an all-time high of 11.60 per cent in March 1980 and a record low of 1.47 per cent in July 2009.
Analysts' current forecast is for a gentle decline in inflation to 2.5 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the USD, while a lower-than-expected reading could be bearish for the USD.
Impact: EUR/USD, USD/PLN
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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