US Economic Data: Key reports including CPI (Consumer Price Index), PPI, and Initial Jobless Claims, with significant implications for inflation and economic growth.
Central Bank Decisions: Critical announcements from the FOMC and BoJ, shaping monetary policy and market expectations.
Market Movements: In-depth analysis of S&P 500, US Treasury Yields, and the US Dollar Index, highlighting potential trends and investor strategies.
Welcome to another insightful edition of the Errante Weekly Newsletter. As we move into the second week of June, key economic events and market movements are poised to shape the financial landscape. Here is what you need to know.
The Week Ahead: 10th – 14th June 2024.
Upcoming US Economic Data:
Investors are keenly awaiting crucial US economic data, including the CPI and PPI reports for May, and the Federal Open Market Committee (FOMC) meeting on June 12. The core CPI is anticipated to rise by 0.3% MoM, maintaining a steady 3.4% YoY increase, signaling persistent inflation pressures.
FOMC Meeting:
All eyes will be on the FOMC’s economic projections and subsequent press conference. The market is eager to gauge the Fed’s stance on future interest rate cuts, currently set at 5.5%. The direction provided by Fed Chair Jerome Powell could significantly influence market sentiment and investor strategies.
Market Events and Announcements
The times below are GMT +3.
Monday, 10th June:
02:50 – Japan GDP (Q1): A contraction of 0.5%, signaling economic challenges.
Holidays: Markets in Hong Kong, China, Taiwan, Colombia, and Australia are closed.
Tuesday, 11th June:
9:00 – UK Claimant Count Change: A rising trend indicates weakness in the labor market, which has a trickle-down effect on consumer spending and economic growth.
Wednesday, 12th June:
09:00 – UK GDP (April): Expected growth of 0.4%.
09:00 – German CPI (May): Forecast at 0.1%, indicating potential easing of inflation.
15:30 – US CPI (May): Core CPI expected to rise by 0.3% MoM and 3.4% YoY.
21:00 – FOMC Economic Projections
21:00 – FOMC Statement
21:30 – FOMC Press Conference
Thursday, 13th June:
15:30 – US Initial Jobless Claims: Key labor market indicator.
15:30 – US PPI (May): Reflects producer price changes, crucial for inflation outlook.
20:00 – US 30-Year Bond Auction: Indicator of long-term economic sentiment.
Friday, 14th June:
06:00 – BoJ Interest Rate Decision: Expected to hold steady at 0.10%, influencing JPY pairs.
18:00 – Fed Monetary Policy Report
Market Insights: Key Charts to Watch
S&P 500 (SPX) Analysis
The S&P 500 is approaching the critical resistance zone at 5,340.26 and 5,450.85. The upcoming US inflation data, the FOMC meeting, and the June earnings season will be pivotal.
As long as bulls maintain the index above the key 5,264.85 level, the bullish scenario remains intact. Positive earnings reports in June could further bolster the index, especially if inflation data shows signs of cooling and the FOMC hints at a dovish stance. A softer USD and declining bond yields would also support equity markets by making borrowing cheaper and US exports more competitive.
However, should inflation remain high and the FOMC adopt a hawkish stance, the index could face downward pressure, potentially breaking below 5,264.85. Rising bond yields would increase the discount rate for future earnings, while a stronger USD would hurt multinational earnings, amplifying the downside.
Key Levels:
– Support: 5,264.85, 5,191.68
– Resistance: 5,340.26, 5,450.85
US Dollar Index (DXY) Analysis
The US Dollar Index is trading near critical support at 104.080, with resistance levels at 105.184 and 106.490. Despite buyers trying to hold the 104.080 level, the lower tops and bottoms, along with the breaking of the uptrend line, have added to bearish speculations ahead of the CPI and FOMC meeting.
The current trend of lower tops and bottoms suggests a bearish outlook. If CPI data confirms lower inflation and the FOMC signals a dovish stance, the USD Index could break below 104.080, aiming for 102.358. This would support equity markets and potentially lower bond yields as capital flows into riskier assets.
However, if the CPI data reveals persistent inflation and the FOMC maintains a hawkish stance, the narrative for the USD could change. A stronger USD could then push the index above 105.184, targeting 106.490, and increase bond yields as investors seek higher returns.
Key Levels:
– Support: 104.080, 102.358
– Resistance: 105.184, 106.490
10-Year Treasury Yield Analysis
The 10-Year Treasury Yield is at a critical juncture near 4.313%, with significant support at 4.080% and resistance at 4.739%. The tendency is towards falling yields, given the current economic indicators and market conditions.
Signs of cooling inflation and dovish FOMC hints could push yields down, breaking the 4.313% level and potentially targeting 4.080%. Lower yields would ease borrowing costs, support equity prices, and contribute to a weaker USD, enhancing the competitiveness of US exports.
Conversely, if inflation remains high and the FOMC maintains a hawkish stance, yields could rise above 4.638%, targeting 4.739%. This would increase borrowing costs, pressure the S&P 500, and support the USD as higher yields attract foreign investment.
Key Levels:
– Support: 4.080%, 3.789%
– Resistance: 4.638%, 4.739%
Intermarket Dynamics
A stronger USD generally weighs on equities and bond prices, while higher bond yields can suppress equity valuations. Conversely, a weaker USD supports equities and lowers bond yields, making stocks more attractive. Investors should monitor inflation data and FOMC signals closely, as these will drive intermarket movements and provide trading opportunities. Balancing portfolios to hedge against these potential moves will be essential in navigating the upcoming week.
Errante’s Weekly Newsletter brings you critical market insights to keep you ahead in the financial world. Stay informed and make strategic decisions with Errante.
If you have any questions or require any assistance, please contact one of our support team members via our Live Chat or email [email protected].
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