SPEECHES BY BOE’S CARNEY AND BY FED TO GUIDE MARKETS
Monetary policy takes centre stage on Tuesday, with the likes of Mark Carney and Stanley Fischer scheduled to deliver speeches.
Bank of England (BOE) Governor Mark Carney will deliver a speech at the Mansion House at 07:30 GMT. His remarks come as Britain and Europe embarked on Brexit negotiations, which are expected to last for at least two years. Traders will carefully monitor Carney’s remarks on Tuesday for clues about future policy decisions in the wake of Brexit talks.
Britain’s separation from the EU has laid waste to the British pound, which plunged to 30-year lows following the referendum last June. The pound softened at the start of the week as traders evaluated day one of EU exit talks.
At 12:00 GMT, US Federal Reserve Vice Chair Stanley Fischer is scheduled to deliver a keynote address at the DNB-Riksbank Macroprudential Conference Series in Amsterdam. The Fed’s No. 2 was part of the committee that voted to raise interest rates last week.
The Fed’s vote to tighten monetary policy came even as inflation and economic growth showed signs of weakening. Core consumer inflation softened last month to its lowest level since 2015, raising red flags about the central bank’s plan to normalize monetary policy.
Later in the day, Fed Bank of Boston President Eric Rosengren is also slated to speak.
In terms of economic data, the Federal Statistics Office will report on German producer inflation at 06:00 GMT. Factory-gate prices are forecast to fall 0.2% compared to April.
At 8:00 GMT, the European Commission’s statistical agency will report on the current account balance for April.
The financial markets will also keep an eye on commodities, as traders evaluate the trajectory of crude oil after last week’s selloff.
The euro stumbled on Monday as the US dollar regained momentum against a basket of world currencies. The EUR/USD exchange rate fell back toward the 1.1150 handle on Monday, which offers solid short-term support. Below that level, a descending structure would target the psychological 1.11 handle next. A bullish run for the greenback could knock the EUR/USD down a few pegs in the not-too-distant future, making those levels a distinct possibility.
Brexit negotiations weighed on the British pound in early-week trade, reminding traders that downside risks remain in full force when it comes to the cable. Immediate resistance is located at 1.2800. Given the current macro environment facing the sterling, a return to that level and beyond is far from guaranteed. The GBP/USD exchange rate faces immediate support at 1.2730.
Brent crude remains under pressure after a monthlong slump sent prices toward seven-month lows. The short-term technical indicators continue to point to bear market conditions, with the contract facing immediate support at the May swing low.