Hello everyone from the middle of the week. In the next two days, both the European Central Bank and the US Federal Reserve will announce their interest rate decisions.
On the US side, a 25 basis point increase in interest rates is considered as certain with 98.9%. However, at the meeting on June 14, both the dot plot data and Powell’s statements pointed to two rate hikes. As you know, the markets witnessed pricing in the opposite direction of the Fed’s stance in 2023. Until a few months ago, we were seeing that even the interest rate cut was priced in 2023. Of course, this possibility has now been thrown into 2024.
For all these reasons, we need to watch Powell’s speech carefully today. Powell can say “We’re done” about interest rates, or he can leave the doors open for a rate hike again. If Powell expresses another interest rate increase in his speech, we can think that volatility in the markets will increase with the decrease in risk appetite.
On Thursday, our eyes will first turn to the European Central Bank, and then we will focus on the US growth data. Modest growth will erode recession fears.
On Friday, we will receive Core Personal Consumption Expenses data from the US side. CPE data is one of the FED’s favorite indicators in the measure of inflation and excludes food and energy items. A data that will come under or in line with the expectation may ensure that the Fed does not raise additional interest rates.
Economic calendar:
Wednesday, July 26
The US House of Representatives Financial Services Committee will vote on legislation that will establish the regulatory framework for cryptocurrencies and stablecoins.
USA – Fed Rate Decision Expectation: 25 basis points – 21.00
USA – Federal Open Market Committee (FOMC) Statement – 21.00
USA – Fed Chairman Jerome Powell press release – 21.30
Thursday, July 27
Eurozone – Interest Rate Decision Expectation: 25 basis points – 15.15
USA – Gross Domestic Product (GDP) (Quarterly) Expected: 1.7% Previous: 2.0%
USA – Applications for Unemployment Benefits Expected: 235k Previous: 228k
Friday, 28 July
USA – Core Personal Consumption Expenses Price List (MoM) Expectation: 0.2% Previous 0.3%
