Week Ahead – Round two of French elections, Powell testimony and US CPI
French parties race to block Le Pen’s RN
Powell testifies before Senate Banking Committee
US CPI data to shake Fed rate cut bets
RBNZ to leave OCR untouched, focus on language
Euro traders keep gaze locked on French election
Traders will be sitting on the edge of their seats on Sunday, in anticipation of Monday’s open and what market impact the second round of the French election will have.
The far-right National Rally (RN) led the first round last Sunday, but the left-wing New Popular Front (NFP) was not far behind. The outcome also revealed that RN and its allies took first place in 296 out of 577 constituencies, which could translate in absolute majority in the second round.
However, left-wing and centrist parties formed an alliance and decided to withdraw their candidates in electorates where there is a three-way runoff, in an attempt to increase their chances of stopping RN from running the government.
The outcome of the European parliamentary elections revealed that the rise of Eurosceptic parties is a negative development for the euro, thus the coordinated attempt to halt Le Pen’s march is seen as positive.
However, even if the left-wing alliance secures victory and the euro opens with a gap on Monday, uncertainty will not vanish as investors may still be eager to find out whether this could lead to a stable government.
There is also the chance of having a hung parliament, where a minority government will struggle to pass legislation. This could lead to prolonged political paralysis given that no elections can take place for at least 12 months, but if the minority government is led by RN, it may not be that bad for the euro, as the other parties may do whatever it takes to block their Eurosceptic agenda.
Increasing Fed rate cut bets to dent the US dollar
In the US, Fed Chair Powell will testify on the economic outlook and recent monetary policy actions before the Senate Banking Committee. The Fed Chief will present a prepared statement and then the committee will conduct a Q&A session.
This week, at the ECB forum on central banking in Sintra, Powell said that they are getting back on “the disinflationary path,” adding though that they want to be more confident about inflation’s return towards their 2% target before they start loosening policy.
His comments were interpreted as corroborating the market narrative that two quarter-point rate reductions may be warranted this year, despite the Fed’s own dot plot pointing to just one. What’s more, following the disappointing ISM PMIs for June, the probability of the first reduction to be delivered in September has risen to 80%.
![](https://www.xm.com/wp-content/uploads/2024/07/FedFunds_050724.png)
Although Powell is unlikely to deviate much from what he said in Portugal, the Q&A session may include more targeted questions that result in more clarity regarding the Fed’s plans.
Nonetheless, even if he insists that there is no urgency to press the rate cut button, whether the market pricing will drastically change could depend more on the outcome of the US CPI data on Thursday.
![](https://www.xm.com/wp-content/uploads/2024/07/USCPIs_050724.png)
Taking into account that the price subindices of both the ISM manufacturing and non-manufacturing PMI surveys declined, the risks to the CPIs may be tilted to the downside. A further slowdown in inflation may convince more market participants to bet on two Fed rate cuts by December and thereby weigh on the US dollar.
Kiwi traders may cheer hawkish RBNZ
There is also a central bank meeting on next week’s agenda. During the Asian session on Wednesday, the RBNZ will announce its decision on monetary policy, but no change on interest rates is expected. There is only a small 5% chance for a 25bps rate cut.
At its latest gathering back in May, this Bank said that they need to maintain policy at restrictive levels to ensure that inflation returns to target, while more importantly, they discussed the possibility of raising interest rates at that gathering.
Since then, retail sales for Q1 came in better than expected, while the GDP data revealed that the economy grew by more than expected during that period. Although inflation numbers were not released, the aforementioned data corroborate the Bank’s hawkish stance.
Yet, investors are penciling in slightly more than 40bps worth of rate cuts by the end of the year. With the RBNZ having little reason to shift to a less hawkish stance, a reiteration of the May message may prompt investors to scale back rate cut bets, thereby boosting the kiwi.
![](https://www.xm.com/wp-content/uploads/2024/07/RBNZ_050724.png)
Kiwi traders alongside their aussie friends will also pay attention to the Chinese CPI and PPI data, due out just half an hour ahead of the RBNZ decision.
UK data and sterling in post-election era
In the UK, with the general election behind them, pound traders may turn their attention back to economic releases. On Thursday, the monthly GDP for May alongside the industrial and manufacturing production numbers for the month are coming out.
With the Labor Party securing a majority in Parliament, the BoE may speed up its easing process on expectations of a more fiscally responsible government, which could prove negative for the pound in the medium term. Thus, improving GDP during the month of May is unlikely to severely alter market expectations with regards to the BoE’s plans.متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔