Weekly Market Outlook: BOE & PMI data in focus
Last week’s volatility highlighted the importance of central bank meetings and interest rate decisions. As the Fed changed their tone, the US dollar surged higher across the board causing shockwaves through global markets.
This is why Thursday’s Bank of England Monetary Policy Statement and interest rate decision will be widely watched. Will the bank be forced to consider interest rate rises due to the recent positive data? If so, the pound could fly higher.
The moves in the US dollar have also had a huge impact on global stock market indices. Analysing the dip buying action will be critical to see just how strong the overall uptrend is.
You can learn more about some of the global themes affecting the markets in this selection of new education articles.
Weekly Forex Calendar
Source: Forex Calendar by Admirals
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Trader’s Radar – Bank of England Interest Rate Decision
At 12pm BST on Thursday, the Bank of England publishes its latest Monetary Policy Statement and interest rate decision. As there is no press conference scheduled the market isn’t expecting any changes. However, it’s still one to watch considering the moves in the US dollar when the Fed changed position.
Recent economic data for the UK has been positive with strong numbers in GDP, inflation and growth. At some point, this will cause the bank to think about reducing or stopping its bond purchases and start to increase interest rates. But, it’s all about timing.
Central banks can surprise the markets so it’s one to watch!
Source: Admirals MetaTrader 5 Web, GBPUSD, Monthly - Data range: from Feb 1, 2009, to Jun 21, 2021. Performed on Jun 21, 2021, at 7:00 am GMT. Please note: Past performance is not a reliable indicator of future results.
In the long-term, the monthly price chart of GBPUSD shown above it is clear to see the recent upward momentum that has stalled around historical resistance – just below the 1.4000 level. If the price can break through this multi-year high there is a very strong case for further upside momentum.
However, rather than seeing just a technical break we would want this to coincide with a fundamental shift in policy from the Bank of England. Could that be this month or later in the year? Time till tell but it’s important to be ready.
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Corporate Trading Updates and Stock Indices
The recent surge higher in the US dollar and change in Fed policy, caused a huge sell-off in global stock markets last week. Higher interest rates mean higher borrowing costs which can mean less growth.
Overall though, the long-term trends are still intact. The moves in US stock market indices have been uneven with the Nasdaq 100 index surging to record highs last week, the S&P 500 index topping out at its previous all-time high and the Dow Jones 30 in an intra-day downtrend.
Source: Admiral Markets MetaTrader 5 Web, SP500, Daily - Data range: from Oct 26, 2020, to Jun 21, 2021, performed on Jun 21, 2021, at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Past five-year performance of the S&P 500:
- 2020 = +16.17%
- 2019 = +29.09%
- 2018 = -5.96%
- 2017 = +19.08%
- 2016 = +8.80
In the daily chart of the S&P 500 index shown above its clear to see the long-term trend is still intact. However, the price has failed to make a higher cycle formation and is now starting to form an ascending triangle.
The appetite of buyers as the lower trend line which also coincides with the 50-period (red) exponential moving average will be key. Is this the place buyers will stage a rally? They’ve turned up around this level many times before.
A break below this level could mean further downside and a bigger correction so it’s a level to watch.
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