No rate hike expected on Fed meeting

Market Overview Video Transcript

US dollar index marginally edged up last week while the US stocks were almost unchanged. Price movements were weak due to scant data.

Fed Chair Janet Yellen outlined in her speech on Monday negative trends in the labour market in May and poor increase in private demand, labour productivity and inflation. Meanwhile she emphasized the macroeconomic data were weak only in May and the rate may still be hiked in 2016. This words partly improved investors confidence. US stock market indices have been rising for three straight days while S&P 500 has hit a fresh 7-month high. On the contrary, US dollar weakened as Fed funds futures price in 3% chances for June rate hike.

On Tuesday the weak labour productivity data were released in US for Q1 2016 while Wednesday did not bring economic data at all. As a result, the US dollar continued weakening while the stocks were advancing. Quite strong April wholesales data came out in US and the market trends reversed. US dollar index started edging up while US stocks retreated. Some investors started noticing that S&P 500 index approached its historical high and needs more positive news for further growth. US dollar rose as yet slightly weakened in the wake of lower factory orders in April in Japan. US stock markets went on dipping on Friday. The stock indices soared 15-16% from the February lows approaching historical highs. Some investors may have booked their profits. The US dollar index rose on Friday. Economic data showed the Michigan University consumer confidence index was neutral. US dollar index strengthened as British pound weakened after yet another opinion poll on Brexit, which is due on June 23, showed the Brexit chances rose to 53%.

This week the most significant data are expected in US on Thursday when the May inflation data will come out. The tentative outlook is neutral which limits potential for US assets price increase. Other days various less important economic data will come out and on Wednesday the Fed meeting will close. The final decision of US regulator may affect the stock markets.