Weekly Market Outlook: ECB and BOC in focus
After last week’s disappointing US employment report sent the US dollar low, all eyes are now on the euro and Canadian dollar this week. The Bank of Canada press conference is on Wednesday, while the European Central Bank press conference is on Thursday – setting up another volatile week.
As corporate earnings season has winded down, US stock indices are taking their clues from the US dollar. This is evident from Friday’s drop in the dollar and rise in the S&P 500 and Nasdaq 100 stock indices.
The direction of the euro may also have a big impact on European stock market indices which have been in uptrends for much of this year.
You can learn more about some of the global themes affecting the markets in this selection of new education articles:
Weekly Forex Calendar
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Trader’s Radar – ECB Press Conference
The ECB Monetary Policy Statement is due for release on Thursday 10 June at 12:45 pm BST. This is accompanied by the interest rate decision and followed by a press conference at 1:30 pm BST.
It’s likely to be a volatile announcement as the euro has been rising sharply against the US dollar since the beginning of April and is up more than 500 pips which is nearly 5%. This may bring out some members to comment on the exchange rate which the bank prefers to have much lower.
The central bank has also commented in the past that the Pandemic Emergency Purchase Programme (PEPP) will be reviewed in the June meeting. This will make it tricky for ECB president Christine Lagarde, clearing the path for some volatile moves on Thursday.
In the long-term monthly price chart of EURUSD above, it’s clear to see the rally higher from the lows of the pandemic in April 2020. Since then, the price has made a series of higher lows (as shown by the small black horizontal lines) which is often a confirmation of an uptrend.
If the US dollar remains weak due to last week’s disappointing employment report, there is scope for EURUSD to roam higher – especially if the central bank remain upbeat about the progress of the vaccine rollout and Eurozone economy.
This makes the multi-year high around ~1.2413 an interesting price target for the bulls in the market.
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Corporate Trading Updates and Stock Indices
As corporate earnings season winds down, most stock market indices are now likely to take their clues from growth in the domestic economy. The US stock market indices remain one of the most interesting due to last week's much weaker than expected employment report.
This may underpin the fact the Fed may stick with lower interest rates longer than the market is expecting which is likely to fuel some potential upside in stock markets. The same holds true for European stock indices which have been trading at record highs as the ECB stick with their accommodative policy measures.
Past five-year performance of the S&P 500:
- 2020 = +16.17%
- 2019 = +29.09%
- 2018 = -5.96%
- 2017 = +19.08%
- 2016 = +8.80%
- 2015 = -0.82%
The daily chart of the S&P 500 index shown above, highlights a clear uptrend over the past few quarters. The 50-period (red) exponential moving average is trading above the 100-period (green) exponential moving average which is often used as a confirmation of an up trending market.
The price has continued to find support at these moving averages and the recent bounce of the 50-period moving average has attracted more buyers. The next target level is likely to be the record high around ~$4,247.00.
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