US markets are as robust as they can be, because investors surely have put aside any concerns about the European crisis, which came under the spotlight last week as the major indices in the US continued their rally by posting another record high. But, this morning, there is a cautiousness among traders, as we do have the key speeches from the central banks across the both sides of the Atlantic. Miss Yellen is going to give her semi annual speech to the senate, and there is no question that she will be grilled about the health of the economy and further prospects of hike in the interest rate. Yes, it is true, that certain Fed members have delivered some hawkish comments, and they are perhaps in favour of raising the interest rate sooner than later, but the question is, if Yellen will maintain her dovish tone during her testimony today.
We believe that she is going to maintain her tone and may not be in no rush to increase the interest rate yet. As long as she delivers the same message to the investors, the dollar may remain weak against the basket of currencies and we may see a rally in the stock markets.
The reasons are simple, as long as there is cheap money in the market, we may very well continue to see the string of record high. Janet Yellen’s decisions are very much dependent on the economic data, and if truth be told, we only have the jobs data which is better than the last quarter and the rest of the figures are not that strong at all. The retail sales data which is due today could further cement this argument. The forecast is for 0.6% for the month of June which is no higher than 0.3% from its previous reading. If the final number does print the same number as the forecast, even then, we will be still behind the final net number of 1.5% which was in Q1. Later in the day, we also have the Empire Manufacturing data due for the US and the forecast is for 17.
Back in Europe, we have a number of key events which is going to drive the trading session. To start with, we have the German ZEW sentiment data and given that the manufacturing and industrial production data had not shown much signs of strength, the forecast is for the weak number. If the original print does deviate much from the forecast, we could see the markets taking the nose dive along with the euro.
Having said that, the main focus for the European markets is going to be the speech by Mark Carney, who is under tremendous pressure to increase the interest rate, although we do not think that an increase in the interest rate is going to take place before their November meeting. The inflation data for the UK which is due this morning may confirm another higher tick along with retail sales data which is expected to come in at 2.5%.
Disclosure: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.