What To Watch Across Markets This Week: 3rd June 2024
- The Fed's preferred inflation measure shows up lower-than-expected, signaling easing inflation pressures.
- OPEC's decides to extend prolonged production cuts
- JOTLS Job Openings indicate a softer labor market
- The Bank of Canada and the European Central Bank are expected to cut rates by 25 basis points
- US Non-Farm Employment Change data could lead to potential dollar decline
Last week saw significant market moves, including shifts in the US Dollar Index following news of lower-than-expected inflation data and developments in OPEC's production policies. Looking ahead, the focus remains on upcoming releases and central bank actions, which could further impact market dynamics and monetary policy decisions. Let's take a closer look at what took place last week.
Top Highlights from Last Week
On Friday, May 31, 2024, the Core PCE Price Index m/m, the Federal Reserve's favored measure of inflation, was released. It showed a lower-than-expected increase of 0.2% compared to the previous month's 0.3%, signaling easing inflationary pressures. As a result, the US Dollar Index dropped around 0.23%, reflecting heightened speculation that the Federal Reserve may initiate rate cuts later this year.
On Sunday, OPEC met and took the decision to extend and prolong production cuts. OPEC intends to gradually diminish the 2.2 million barrels per day reductions from October 2024 to September 2025.
Insights for the Week Ahead
On Monday, the Bureau of Labor Statistics will release the JOLTS Job Openings data for the US at 6:00 PM (Dubai Time). Analysts expect a decline in job openings, excluding the farming sector, from a forecasted 8.49 million to 8.40 million, indicating a softer labor market. If the anticipated figure of 8.40 million materializes, it would represent the lowest level since May 2021. Consequently, analysts suggest this could exert downward pressure on the US Dollar.
The Bank of Canada (Wednesday, June 5 at 5:45 PM) and the European Central Bank (Thursday, June 6 at 4:15 PM) are anticipated to begin rate cutting this week. Both are expected to reduce their key policy rates by 25 basis points in response to falling inflation. This is despite the EU rate rising to 2.6% in May from 2.4% in April. These initial cuts are likely to be accompanied by indications of further cautious easing if inflation continues to decline as anticipated. Following these adjustments, Canada's policy rate will potentially drop to 4.75%, while the ECB's rate will potentially reach 4.25%.
On Friday, June 7, 2024, the Bureau of Labor Statistics is set to release the Non-Farm Employment Change data for the US at 4:30 PM (Dubai Time). Markets expect an increase from the previous figure of 175K to a forecasted 185K, indicating a strengthening labor market. However, if the actual data falls short of the anticipated 185K, or registers a figure lower than the previous 175K level, this could lead to a decline to a decline in the dollar, analysts suggest. This could also pressure the Federal Reserve to start implementing rate cuts in 2024.
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