Weekly Market Review - June 17-21

This week, the US dollar has been the worst performer, losing 1.02% against the euro and 0.68% against the British pound. The American currency has lost momentum as the Fed hinted that it was ready to cut interest rates if needed. The dovish sentiment comes amid the current trade tensions between the US and China.

In the commodities market, gold and silver continue their bullish rally on general worries over a global economic recession. The precious metals gained 4.57% and 4.19% for the week, respectively.

It seems that Bitcoin is also benefiting from its safe-haven asset status. The cryptocurrency is slowly but steadily approaching the $10,000 level, currently trading at around $9,780.

Macroeconomic News

US Fed Switches to Dovish Stance

The US Federal Reserve maintained its key interest rate in the range of 2.25-2.50% per annum but made it clear that it could reduce borrowing costs by up to 0.5% before the end of this year as a response to the growing uncertainty in the economy and a decrease in expected inflation. Most analysts expect the Fed to maintain the rates at the previous levels. The central bank gave up expressions hinting to more patience and said it would support the growth of the economy.

US Fed Keeps GDP Outlook

The US Federal Reserve System (Fed) maintained its forecast for US GDP growth for 2019 at 2.1%, while the outlook for 2020 increased to 2% from 1.9%. The central bank cut its inflation forecast (PCE index) for 2019 to 1.5% from 1.8%, while for 2020, the inflation outlook was reduced to 1.9% from 2%. Unemployment, according to Fed estimates, will be 3.6% by the end of 2019, instead of 3.7% expected in March. Further, it will grow gradually: up to 3.7% in 2020 and up to 3.8% in 2021.

Bank of England Maintains Interest Rate

The Bank of England maintained the base interest rate at 0.75%. Also, it left untouched the volume of the program for the purchase of government bonds (quantitative easing) at 435 billion pounds, and the volume of purchases of corporate bonds at 10 billion pounds. All bank decisions, which coincided with market expectations, were voted unanimously by all members of the MPC. Meanwhile, the central bank expressed concerns over the current trade tensions and the situation around Brexit.

US Jobless Claims Fell More Than Expected

The number of Americans who first applied for unemployment benefits fell last week more than expected, by 6,000 to 216,000, from 222,000 the previous week, according to a report by the US Labor Department. Analysts surveyed by Bloomberg expected a decline by 2,000 to 220,000. The moving average applications for the last four weeks, a less volatile indicator, increased to 218,750 from 217,750. Meanwhile, the number of US citizens who continue to receive unemployment benefits for the week ending June 8 fell 37,000 to 1.662 million.

Italy’s GDP Growth Probably Slowed

The growth of the Italian economy most likely contracted in the second quarter of 2019, according to a report by Istat. The agency said that the likelihood of a drop in GDP growth for the second quarter is relatively high - 0.65 on a scale where 0 corresponds to growth and 1 to a contraction in the economy. Economists polled by Bloomberg expect an expansion in the Italian economy. In the first quarter of 2019, Italy’s GDP increased by 0.1% in quarterly terms.

Eurozone Consumer Confidence Weakens

The European Commission said on Thursday that eurozone’s consumer confidence index declined by 0.7 points this month from the May figure. Thus, the eurozone consumer morale fell to -7.2 this month from -6.5 in May, while analysts surveyed by Reuters had expected the reading to be at -6.5. In the European Union as a whole, consumer sentiment fell by 0.7 points to -6.9. The negative trend is seen amid ongoing trade tensions between the US and China.

Upcoming News to Watch

Next week on Thursday, the US will publish its economic growth performance for the first quarter. Analysts forecast the growth pace at 3.2% compared to the previous quarter, after a 3.1% growth dynamic recorded in Q4 2018. Other relevant US economic indicators are scheduled for Tuesday, including the house price index, new home sales, and CB consumer confidence index, among others. Later during the day, Fed Chair Jerome Powell will hold a speech, which might shake the USD price action.

The week will end with several important economic updates from the European Union, where France will release inflation and producer price index (PPI) data while Spain and the UK will report on their GDP growth. Besides this, the eurozone will release the annual CPI change for June.

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