Stock Market - The Week Ahead

FOMC

Market observers are more concerned with how many rate reductions officials will hint at for the remainder of 2024, as it is highly anticipated that the Fed will keep interest rates on quo at the end of its two-day policy meeting on Wednesday.

The revised dot plot, which indicated three 25-basis point cuts in March, is probably going to indicate two this year.

The markets reduced their expectations for rate reduction this year after seeing Friday's employment statistics, which showed that wages and jobs grew faster in May despite a little increase in the unemployment rate. The first rate cut is now anticipated to occur in September.

Fed officials have stated in recent remarks that they are not in a rush to lower rates because inflation is still there and the GDP outlook is still favourable.

UK Data

In order to determine if wage pressures are abating quickly enough to make a rate drop by the Bank of England a realistic possibility in the near future, market players will be keenly observing the most recent U.K. employment data on Tuesday.

In the three months leading up to March, average weekly earnings—exclusive of bonuses—grew by 6% annually. The 9.8% increase in Britain's minimum wage in April might accelerate this growth rate.

Economists had previously predicted a rate decrease in June, but current inflationary pressures are preventing markets from fully pricing a change until November.

On Wednesday, April GDP data is anticipated to reveal a deceleration in growth following a strong 0.6% gain in the first quarter.

May CPI

Just a few hours before the Fed announcement on Wednesday, May's inflation statistics are scheduled to be announced. Expectations for rate reduction may become more solid if inflation continues to decline, particularly in light of the weakening economy.

Wall Street will be keeping a tight eye on things thanks to declining inflation. This year, traders are still pricing in some monetary easing; there are still dwindling expectations of a July decrease.

A poor figure for inflation might startle markets and revive long-dormant worries of a recession.

Bank of Japan

When the Bank of Japan ends its two-day meeting on Friday, Governor Kazuo Ueda has already alluded to a potential tapering of the bank's extensive quantitative easing program.

He stressed on Thursday that policymakers will proceed "cautiously" with rate rises following the BOJ's first raise since 2007 in March, and said it would be reasonable to scale back on the large asset purchases as the institution ends decades of stimulus.

A reduction in monthly purchases of 1 trillion yen ($6.4 billion) to about 5 trillion yen is likely, according to Mizuho Securities, and the bond markets may be able to withstand it.

(Sources: investing.com, reuters.com)