Welcome to a new trading week which is heavy loaded with event risk.
Interest rate decisions will be in focus, starting with the Federal Reserve on Wednesday. The Fed is expected to raise rates by 25bp to 5.25 percent, a level not seen since 2007. Considering that this decision is already priced in, the market’s attention will fall primarily on guidance for the rest of this year. After this month’s rate hike market participants expect the central bank to stand pat for three meetings and at the start of Q4, the Fed is expected to start cutting rates. However, since inflation is still robust, expectations for a rate cut are quite unrealistic. The Fed may try to play down such chances later this year. A surprisingly more hawkish decision on Wednesday could thus benefit the greenback.
On Thursday the European Central Bank is also expected to hike interest rates by 25bp.
Last but not least, on Friday we will have the U.S. nonfarm payrolls scheduled for release. NFP results could disappoint, missing estimates of a gain of 178,000 jobs. Soft numbers will be bearish for the U.S. dollar by triggering a dovish repricing of the Fed’s policy outlook.
Technically, the EUR/USD approaches overbought territory, favoring euro bears.
The British pound ended last week on a positive note with the cable back above 1.25. The pair could, however, come under pressure this week when the Fed and ECB announce their latest monetary policy decisions.
The DAX is hovering around the 16000-barrier and bulls hope for a breakout. However, while a bullish breakout might be imminent, event risk is looming with Thursday’s ECB decision. So, bulls, watch out.
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Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.
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