Weekly Economic & Financial Commentary: Fractures on FOMC Emerge

A majority of Federal Open Market Committee (FOMC) voters made public appearances this week. Policymaker comments are particularly important in assessing the Fed's path after the May meeting language signaled a data-dependent, month-to-month Fed from now on. The consensus around the Fed's next steps appears to be fractured.

Forex and Cryptocurrencies Forecast

We titled our last week's review "Why the Dollar Rose" and detailed the reasons for the strengthening of the American currency. It's fitting to name today's fresh review "Why the Dollar Continues to Rise," and naturally, we will answer this question.

Debt Ceiling Negotiations Set to Resume Today

The negotiations between Biden and McCarthy to lift the US debt ceiling are set to resume today. Risk sentiment weakened on Friday when the republican negotiators said the talks had stalled. The treasury cash balance has fallen to just USD57.3 billion, and yesterday Yellen reaffirmed that June 1 'is a hard deadline' for lifting the ceiling in order to ensure avoiding a default.

Debt Ceiling Talks Off and On, But Carry On

Happily, US President Joe Biden and House Speaker Kevin McCarthy had a ‘productive’ call Sunday and agreed to resume talks today, to avoid what could be a very damaging US default.

EUR/USD Trying to Extend Bottoming Out

EUR/USD is trying to extend its bottoming out. The pair is moving a little higher north of 1.08. Sterling keenly awaits those same PMIs as well as Wednesday’s CPI data. The Bank of England is awaiting evidence of more stubborn (services) inflation before hiking further. That leaves the pound vulnerable to a downside surprise in the data.

PBoC Extends Liquidity as Fed Doves Fly Away Amid Jump in US Inflation Expectations

The People’s Bank of China (PBoC) kept the interest rates unchanged at today’s monetary policy meeting, but extended long-term liquidity to boost anemic Chinese growth.Many analysts expected a rate cut from the PBoC today, after the latest set of economic data revealed slowing exports and a faster-than-expected fall in Chinese inflation – both being a strong sign of insufficient growth momentum for the EM giant.

SP 500: Ignoring US Debt Ceiling Standoff Risk

The US debt ceiling limit is now getting closer to hitting the US$31.4 trillion cap that was approved previously in December 2021. Failure to extend the current ceiling and the shortfall in tax revenue collections to cover fiscal policies spending at this juncture will render the US government inability to issue new bonds to pay for its existing obligations.

Could This Week's Data Reenergize Bank of Japan Expectations?

While the largest central banks globally are close to concluding an almost 2-year rate hiking cycle, the BoJ is still formulating its action plan. The new governor has yet to make an impact, but maybe this week’s data could influence his determination going forward. Additionally, the yen bulls might finally start to feel a bit more confident and possibly attempt a more sustainable rally against the euro.

New Zealand Dollar Rebounds after Sharp Losses

New Zealand’s services sector has enjoyed prolonged growth, with the Services index posting 13 straight readings above 50.0, which indicates expansion. The streak ended today, as the Services index dropped from a downwardly revised 54.8 to 49.8 points. With manufacturing struggling, the services sector has been a key driver of economic growth.

Bitcoin Attracts Buyers on the Dip to 200-Week MA

Bitcoin proved interesting for sellers as it touched the 200-week average, passing close to $26,000 last Friday. By defending this key average, the bulls have convinced the market of the sustainability of the long-term bullish trend. On Saturday and Sunday, the Bulls defended the $26.8K level. On Monday, investors switched to active buying and pushed the price to $27.5K. However, cautious buyers will likely want to see a $28-28.5K takedown as confirmation of the break of last month’s downtrend.