Most Important Economic Events of the Week 06.21.2021 – 06.27.2021

The US dollar has significantly strengthened over the past week, despite the continuing decline in the yield of US 10-year government bonds for 5 consecutive weeks. DXY dollar index added 170 points for a week, strengthened by almost 2%.

At the meeting that ended last week, Fed officials kept key interest rates in the range of 0.00% -0.25%, and the volume of the QE asset purchase program remained at the same level of $ 120 billion per month.

The accompanying statement said that the Fed will continue to adhere to the current parameters of monetary policy until the target levels for inflation and maximum employment are reached, and the level of interest rates will not change. However, the Fed now forecasts two rate hikes in 2023, whereas previously central bank officials promised not to raise rates until the end of 2023.

13 of the 18 central bank governors said they expected short-term interest rates to rise by the end of 2023, compared with only 7 in March. Already 7 representatives of the FOMC against 4 in March expect to start raising rates in 2022.

Probably, these changes in expectations regarding the prospects of the Fed's monetary policy alerted investors and provoked a massive closing of short positions on the dollar, which caused its sharp strengthening.

Nevertheless, the official position of the Fed leadership remained the same. Central bank officials want to get the economy closer to" maximum employment " and sustained annual inflation of 2.0% before scaling back asset purchases. According to them, these goals must be achieved before the regulator moves to raise rates.

Next week, financial market participants will also pay attention to the publication of important macro statistics for Germany, the United Kingdom, the United States, Canada, and the results of the meetings of the central banks of the United Kingdom and China.

Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:

*) new events can be added to the calendar and/or some scheduled events canceled during the coming week

**) specified time – GMT

Monday, June 21

01:30 CNY People's Bank of China Interest Rate Decision

Since May 2012, the People's Bank of China has been steadily lowering the interest rate, providing support to Chinese manufacturers. The bank last lowered the rate in April 2020 (by 0.20% to 3.85% at the moment).

In 2020, in the context of international trade conflicts and a slowing global economy, the world's largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitive ability of goods exported from these countries.

The People's Bank of China is also in line with this process. The depreciation of the yuan became especially relevant in the last 2 years, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative effects of increased duties on the import of Chinese goods to the United States was the depreciation of the national currency of China. This measure was designed, among other things, to maintain the previous volumes of Chinese products imported to the United States, which would cost American buyers cheaper due to the difference in the exchange rates of the national currencies of the United States and China.

An additional strong negative factor was the coronavirus.

It is likely that at this meeting, the People's Bank of China will keep the interest rate at the same level of 3.85%, although a rate cut is also possible.

However, if the People's Bank of China makes unexpected statements or decisions, volatility may increase throughout the financial market. Investors will also be interested in the bank's assessment of the impact of the coronavirus on the Chinese economy and its policy in the near future in this regard.

01:30 AUD Retail Sales Level

The Retail Sales index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near term. An increase in the index is usually a positive factor for the AUD; a decrease in the indicator will negatively affect the AUD. The previous index value (for April) is +1.1%. If the data is weaker than the previous value, the AUD may decline sharply in the short term, above the previous values, the AUD is likely to strengthen.

12:30, 14:00 EUR Speech by ECB President Christine Lagarde

During the speech of the head of the ECB, Christine Lagarde, the volatility of trade increases not only in the euro and European stock indices, but also in the entire financial market, especially if she touches on the topic of monetary policy of the Central Bank. Any hints of a curtailment of the QE program in the euro area will cause the euro to rise. The soft tone of Christine Lagarde's speech and the tendency to continue the ECB's extra-soft monetary policy will have a negative impact on the euro.

The speeches of the head of the ECB after the bank's meetings have a particularly strong impact on the market. In previous periods, the speech of the head of the ECB in similar situations could cause a change in the euro by more than 3%. If Christine Lagarde does not touch on the topic of the ECB's monetary policy, the reaction to her speech will be weak.

Tuesday, June 22

18:00 USD Speech of the head of the Federal Reserve Jerome Powell in Congress

Federal Reserve Chairman Jerome Powell will address Congress on the economy and monetary policy. His comments may affect both short-term and long-term USD trading if he again touches on the topic of the Fed's monetary policy. A more "hawkish" stance on the Fed's monetary policy is seen as positive and strengthens the US dollar, while a more cautious one is seen as negative for the USD.

If he makes unexpected statements, the volatility in trading in the financial markets may increase.

During the recent (June) meeting, Fed officials kept key interest rates in the range of 0.00%-0.25%, and the volume of the QE asset purchase program remained at the same level of $120 billion per month. The accompanying statement said that the Fed will continue to adhere to the current parameters of monetary policy until the targets for inflation and maximum employment are reached, repeating that the level of interest rates will not change.

Nevertheless, the rhetoric of statements from the Fed leadership alerted market participants who are betting on a further weakening of the dollar. The Fed is now forecasting two rate hikes in 2023, whereas earlier central bank officials promised not to raise rates until the end of 2023.

Any hints from Powell confirming the possibility of a tougher approach to the Fed's monetary policy will again cause the dollar to strengthen. His statements about the need for even more lenient central bank policy will cause a fall in the dollar and a rise in US stock markets.

Financial market participants will carefully study his speech in order to catch signals from him regarding the Fed's further actions. If he does not touch on the topic of the Fed's monetary policy, the reaction to his speech will be weak.

23:50 JPY Bank of Japan Monetary Policy Committee Meeting

At this meeting, the Monetary Policy Committee of the Bank of Japan will once again summarize the results of last week's meeting of the bank, analyze the economic situation in Japan and provide guidance on possible future prospects for the Bank of Japan's financial policy.

If the tone of the minutes of the meeting indicates the firmness of the Bank of Japan's intentions regarding monetary policy in the country, it will negatively affect the Japanese stock market and strengthen the yen. Conversely, soft rhetoric about the bank's monetary policy outlook will contribute to the weakening of the yen and the growth of the Japanese stock market.

Wednesday, June 23

07:30 EUR Markit Economics Business Activity Index (PMI) in the manufacturing sector of the German economy (preliminary release). Composite index (PMI) of business activity in the German economy according to Markit Economics (preliminary release)

The PMI business activity index in the manufacturing sector of the German economy is an important indicator of the business environment and the overall state of the German economy. This sector of the economy forms a significant part of Germany's GDP. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Forecast for June (preliminary release): 63.0.

Previous monthly values: 64,4, 66,2, 66,6, 60,7, 57,1, 58,3, 57,8, this indicates an acceleration of business activity in this sector of the German economy after its slowdown in 2020 due to the coronavirus pandemic. The growth of the indicator above the previous values will support the euro (in the short term). Data worse than the forecast will have a negative impact on the euro.

The composite PMI business Activity index in the German economy is an important indicator of the business environment and the overall state of the German economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. June forecast (preliminary release): 57.4 vs 56,2, 55,8, 57,3, 51,1, 50,8, 52,0, 51,7 in the previous months. The publication of this indicator with the specified expected value is likely to support the euro in the short term. Data worse than the forecast and below the value of 50.0 will have a negative impact on the euro.

08 00 EUR Composite index (PMI) of business activity in the manufacturing sector of the Eurozone economy according to Markit Economics (preliminary release)

The PMI manufacturing PMI is an important indicator of the overall health of the European economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. June Forecast (preliminary release): 58.7 vs 57,1, 53,8, 53,2, 62,5, 48,8, 47,8, 49,1, 45,3 in the previous months, which is likely to have a positive impact on the euro. If the data is worse than the forecast, the euro may decline sharply in the short term.

08:30 GBP Index (PMI) of business activity in the services sector of the UK economy according to Markit Economics (preliminary release)

The PMI business activity index in the UK services sector is an important indicator of the state of the British economy. The services sector employs the majority of the UK's working-age population and accounts for approximately 75% of GDP. The most important part of the service sector is still financial services. If the data is worse than the forecast and the previous value, the pound is likely to decline sharply in the short term. The data is better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is seen as positive and strengthens the GBP, below 50 - as negative for the GBP.

Previous values of the indicator: 62.9 in May, 61.0 in April, 56.3 in March, 49.5 in February, 39.5 in January 2021 after falling to the levels of 29.0 in May, 13.4 in April, 34.5 in March 2020. Preliminary forecast for June: 63.0.

12:30 CAD Retail Sales Index

The Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near term. An increase in the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous index value (for March) is +3.6% after falling in March 2020 by -9.9%, in April – by -25% and rising in May by +18.7%. If the data for April turns out to be even weaker than the forecast -5.1%, the CAD may decline sharply in the short term.

18:00 EUR Speech by ECB President Christine Lagarde

During the speech of the head of the ECB, Christine Lagarde, the volatility of trade increases not only in the euro and European stock indices, but also in the entire financial market, especially if she touches on the topic of monetary policy of the Central Bank. If she does not touch on the topic of the ECB's monetary policy, the reaction to her speech will be weak.

Thursday, June 24

00:00 EUR European Council meeting (all day)

This meeting is held with the participation of the heads of State and Government of the countries that are members of the European Council. The purpose of this meeting is, among other things, to discuss the current situation in the global and European economy. The meeting will last all day. After its completion, an official statement on the results of the meeting is published, which may have an impact on the European and global financial markets.

06:45 JPY Speech by Bank of Japan Governor Kuroda

During his speech, the head of the Bank of Japan, Kuroda, is likely to give some comments on the bank's monetary policy. Following the results of the last meeting, the Board of the Bank of Japan by a majority vote decided to leave the key rate at -0.1%, and the target level of yield on 10-year government bonds - near zero. The bank has not changed the guidelines for further monetary policy adopted earlier and reiterated that it would leave interest rates at extremely low levels "for an extended period". "It is necessary to patiently continue easing monetary policy", -said the Head of the Bank of Japan Kuroda. Markets usually react noticeably to Kuroda's speeches if he touches on the topic of monetary policy. Volatility at such times usually increases not only in yen trading, but also throughout the Asian and global financial markets. If he does not touch on monetary policy issues, the reaction to his speech will be weak.

11:00 GBP Bank of England Interest Rate decision. Minutes of the Bank of England meeting. The planned volume of asset purchases by the Bank of England. Monetary Policy Report

In March (March 11 and March 19), 2020, during its extraordinary meetings, the Bank of England twice reduced its interest rate, bringing it to the level of 0.1%, and announced its intention to purchase British government bonds worth 200 billion British pounds, trying to counteract the economic damage from the coronavirus pandemic. The central bank management announced an increase in its bond portfolio to 645 billion pounds, then to 745 billion pounds and to 895 billion pounds from the volume of 445 billion pounds at that time. "The current situation is completely unprecedented", the Governor of the Bank of England, Andrew Bailey, said at a press conference after an emergency meeting on March 19. Bailey said he expects the economy to contract sharply due to the coronavirus, and the Bank of England is ready to take further stimulus measures if necessary. "No, we're not done acting yet", he said. Based on these statements by Andrew Bailey, it is fair to expect further action from the Bank of England in the direction of easing its monetary policy. It is possible that at this meeting on June 24, the Bank of England will take them again, increasing the volume of bond purchases or lowering the interest rate. Although, most economists believe that the Bank of England will refrain from these actions for the time being.

Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the placement of votes "for" and "against" an increase/decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country's economic growth, as well as a large current account deficit of the UK balance of payments.

The intrigue about the further actions of the Bank of England remains. And trading in the pound and the FTSE100 index provides a lot of trading opportunities during the publication of the bank's decision on rates.

Also at the same time, the Bank of England's monetary policy report will be published, containing an assessment of the economic outlook and inflation. At this time, the volatility in the pound quotes may increase sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the level of inflation. If the tone of the report is soft, the British stock market will receive support, and the pound will decline. Conversely, the report's tough rhetoric on curbing inflation, implying an interest rate hike in the UK, will lead to a stronger pound.

12:30 USD Orders for durable goods. Orders for capital goods (excluding defense and aviation). Annual US GDP for the 1st quarter (final estimate)

 This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable goods used for the production of durable goods and services), involving large investments. Goods produced in the defense and aviation sectors of the American economy are not included in this indicator. A high result strengthens the USD. Previous values of the indicator "orders for durable goods": -1.3% in April, +1% in March, -1.2% in February, +3.4% in January 2021, +1.2% in December, +1.3% in November, +1.8% in October, -18.3% in April, -16.7% in March, +2.0% in February, -0.2% in January 2020.

Previous values of the indicator "orders for capital goods excluding defense and aviation": +2.2% in April, +1% in March, -0.9% in February, +0.6% in January 2021, +1.5% in December, +1.2% in November, +1.9% in September, +2.1% in August, -6.6% in April, -1.3% in March, -0.6% in February, +0.9% in January 2020.

In theory, the relative growth of the indicator has a positive impact on the dollar; the market reaction to its negative value may be negative for the dollar in the short term. Data worse than the previous value will also have a negative impact on the dollar quotes.

Forecast for May: +1.9% (orders for durable goods), +1.5% (orders for capital goods excluding defense and aviation).

It seems that the growth of indicators continues after their recovery in the previous months from a strong fall in March and April 2020, which should have a positive impact on the dollar. The better-than-expected data will also have a positive impact on the dollar.

GDP data is one of the key data (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report negatively affects the US dollar. In the previous 4th quarter, GDP grew by +4.3% after an increase of +33.4% in Q3 2020, and after a drop of -31.4% in Q2 and -5.0% in Q1 2020.

If the data points to a decline in GDP in the 1st quarter, the dollar will be under pressure. Positive GDP data will support the dollar and US stock indexes, although they are already mostly taken into account in prices. The preliminary forecast for the 1st quarter of 2021 was: +6.4%.

Friday, June 25

00: 00 EUR European Council meeting (all day)

This meeting is held with the participation of the heads of State and Government of the countries that are members of the European Council. The purpose of this meeting is, among other things, to discuss the current situation in the global and European economy. The meeting will last all day. After its completion, an official statement on the results of the meeting is published, which may have an impact on the European and global financial markets.