Weekly Market: S&P 500, Gold, US Dollar; US ISM, Eurozone Retail Sales, RBA, Japan Econ Watchers, China Inflation

Global equity markets rose, led by solid gains in US equities, as markets welcomed the passage of a debt ceiling bill that averted a catastrophic US default. Debt negotiations in Washington have been the focus of market attention in recent weeks, and the passage of the bill raising the government’s $31.4 trillion debt ceiling removed a major uncertainty.

The S&P 500 rose 1.8%, while the Nasdaq 100 index gained 1.7%. Germany’s DAX 40 rose 0.4%, while Britain’s FTSE 100 slipped 0.2%. In Asia, the Hang Seng Index rose 1.1 %, while Japan’s Nikkei 225 gained 2.1 %.

Past week market performance

Source Data: Bloomberg; chart prepared in Python.

Moreover, US data have been better than expected in recent weeks, as shown by the Economic Surprise Index. On Friday, non-farm payrolls rose much more than expected in May, pointing to tightening labour market conditions. However, with the Federal Reserve expected to suspend its rate hikes, inflation having eased in recent months and economic growth showing signs of resilience, equities appear to be in favourable territory.

The market now expects a 74% chance of a rate pause at the June 13-14 FOMC meeting, up from 35% a week ago after several Fed officials, including the vice-chairman-designate, hinted at a “waiver” in June. “A waiver of a rate hike at the upcoming meeting would allow the committee to see more data before making decisions on the extent of further policy tightening,” Vice Chairman-designate Philip Jefferson said earlier this week. He added, however, that a decision to hold rates steady should not be seen as the end of the tightening cycle. Fed Chair Powell had earlier this month left the door open for a rate pause at the June meeting.

Next week, the US ISM Services PMI for May and the China Caixin Services PMI for May will be released on Monday. The RBA interest rate decision and Eurozone retail sales are due on Tuesday. RBA Governor Lowe’s speech and Australian Q1 GDP are due on Wednesday. Japan Q1 GDP and Eco Watchers Survey, and Eurozone Q1 GDP on Thursday. China’s May inflation data is expected on Friday.

Predictions:

Weekly Euro Forecast: EUR/USD ends the week with a whimper, but a recovery remains in play

A rather disappointing week overall, with the EURUSD in particular struggling for direction as the euro continues to lose ground against both the GBP and JPY. Given the lack of catalysts, is there any reason to believe that the euro will stop its slide?

British Pound – Outlook for the Week: GBP/USD, EUR/GBP and GBP/JPY Prospects

The British pound had a strong week against a number of currencies, supported by expectations that UK interest rates have further to rise.

Australian dollar outlook: RBA could surprise the doves

The Australian dollar recovered from a new low last week as the US dollar bounced off the debt ceiling decision, but the RBA could play a bigger role in the week ahead.

US dollar weekly forecast: DXY turns to Wall Street as economic meetings quieten down

The US dollar took a breather last week as the still-tight labour market leaves the door open for the Fed to tighten monetary policy again in July. With no major economic data due, the DXY’s focus turns to Wall Street.

Gold price forecast: dreams of new records dashed for now as bears strike

The outlook for the gold price is gradually becoming more bearish from a fundamental perspective, as the resilience of the US economy could prompt the Federal Reserve to raise interest rates further later this year.

S&P 500, Nasdaq week ahead: US stocks rise despite positive labour market data

US equities enter the weekend stronger after the Federal Reserve abandoned its restraint, an agreement was reached on the debt ceiling and average hourly wages held steady. However, there are signs of overheating.

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