MONETARY POLICY IN FOCUS ON MONDAY
Monetary policy discussion will continue to impact the financial markets this week, as investors gear up for a deluge of central-bank speeches in the coming days. Action begins on Monday when members of the Federal Reserve and European Central Bank (ECB) deliver public remarks.
The monetary policy wire begins at 12:45 GMT when the Federal Reserve’s William Dudley delivers public commentary. The head of the New York Fed is planning to leave his position this month.
Federal Open Market Committee (FOMC) members Elizabeth Duke, Raphael Bostic and John Williams are also scheduled to deliver speeches on Monday. These officials participated in the Fed’s policy meeting last week, where it was decided that interest rates would rise by 25 basis points. In doing so, the Fed outlined the likelihood of two more upward adjustments this year.
European Central Bank President Mario Draghi will deliver opening remarks at the ECB’s Forum on Central Banking in Sintra, Portugal at 19:45 GMT. Draghi and his colleagues from the Governing Council will be in the headlines all week as the summit unfolds.
Last Thursday, ECB policymakers said they would put an end to quantitative easing by the end of the year. Interest rates are expected to stay at rock bottom for at least one year. The central bank will begin tapering bond purchases in September and end the program in December.
On the economic calendar, very few data releases are scheduled at the start of the week. The Italian government will report on global and Europe-wide trade at 08:00 GMT.
In the North American session, the National Association of Home Builders (NAHB) will release its monthly housing market index. The June index is forecast to hold steady at 70.
At 22:00, Westpac will release New Zealand’s consumer survey for the second quarter. Although the report will be released early Tuesday local time, it will hit North American trading desks in the late afternoon.
Europe’s common currency continued lower on Monday after a modest rally at the end last week. EUR/USD is trading below 1.1600, having declined 230 pips since last Thursday. With bearish sentiment intact, the pair is eyeing immediate support near 1.1580.
Cable is in consolidation mode after declining sharply in the wake of the Federal Reserve’s policy decision last week. GBP/USD is now trading around 1.3270, with markets turning their attention to the Bank of England’s upcoming policy decision. A failure to hold the 1.3250 handle could expose cable to bigger losses extending down to around 1.2330.
The Australian dollar opened lower on Monday, as the greenback continued to assert its dominance on the global currency market. AUD/USD touched a low of around 0.7420 but has since rebounded to around 0.7433. The pair is down roughly 170 pips from Wednesday’s swing high. Immediate support is located at 0.7410.