Last week, major news about the dollar was published, which brought good fluctuations in the symbols related to the dollar. On Wednesday, the US inflation data was released. In general, the data was in line with market expectations, and inflation is still decreasing at a small pace, with the annual consumer price index falling from 5% in March to 4.9% in April. The market's reaction to this data, as mentioned in last week's fundamental analysis, in the initial moments of the news release, the US dollar weakened, so gold reached almost $2050, but then it reversed its course and went down.
With these inflation data, the Federal Reserve will likely keep the interest rate constant in its next meeting, or even if it raises it, it will be the last increase in the interest rate of this bank, which means that the contractionary and aggressive policies of countries and banks are coming to an end. The interest rates are close to their peak, and the consequences of these policies in the data and the economy are growing. But market participants are looking for whether the US interest rate reduction policy will start in 2023 or not? The answer to this question depends on significant data such as inflation and employment. If these two data are decreasing, the US interest rate can decline this year, otherwise, the answer is no.
Therefore, in your fundamental analysis as a trader, from now on, you should look for when expansionary policies and interest rate reduction will start. It is worth mentioning that lowering the interest rate in 2023 will reduce the dollar's strength, and a decrease in the interest rate next year will strengthen the dollar.
Read More: The Federal Reserve interest rates effect on Forex Trading
On Friday, the weekly report from the University of Michigan (UoM) showed that the consumer confidence index fell to 57.7 in May from 63.5 in April. The long-term inflation component of the survey reached 3.2%, the highest rate since 2011.
There was no particular news about the banking crisis last week, only PacWest Bank, one of the regional banks negatively affected by the banking crisis, said on Thursday that its deposits fell by nearly 10% last week.
However, one should keep an eye on the news of this crisis because this crisis has arisen due to the increase in interest rates, and the situation can worsen if not controlled. In a crisis, the US dollar might have a dual behavior. 1- The dollar weakens due to the banking crisis. 2- Sometimes, the dollar can be a safe asset and become strong during a crisis.
In the coming week, there is no busy economic calendar news. The most important event of this week will be the speech of the head of the central banks of the countries, which can be important in determining the future of monetary policies.
On Tuesday at 12:30, Core Retail Sales m/m (April) (Prev: -0.4% | Fore: 0.4%) and Retail Sales m/m (April) (Prev: -0.6% | Fore: 0.8 %) indicate growth expectations for retailers, if released in line with or above expectations, the US dollar could strengthen. The market's reaction must reduce, as this data is unlikely to impact the Fed's rate outlook significantly.
As usual, every Thursday at 12:30, the US Unemployment Claims index (Prev: 264K | Fore: 251K) is published.
On Friday, there will be a speech by several members of the Federal Reserve who can give some points for the future monetary policies of the Federal Reserve. But the most important one will be the Federal Reserve Chairman Mr. Powell's speech at 15:00. Market activists are looking for answers to two questions from Mr. Powell's speech, which the second question is more important than the first. 1- Considering the published employment and inflation data, will the Federal Reserve raise interest rates in its next meeting? 2- Will the Federal Reserve reduce the interest rate in 2023 or not?
The answer to these two questions can determine the dollar's path for some time. The US dollar will be strong if Mr. Powell talks about an interest rate increase first and about not reducing the interest rate in 2023 secondly. And if he talks about the possibility of interest rate reduction in 2023, the US dollar will be weak.
Please note that during the Federal Reserve Chairman's speech, dollar symbols may have high fluctuations.
Note: during the Federal Reserve Chairman's speech, abnormal fluctuations may occur in symbols related to the dollar. We recommend following capital management in trading.
On Tuesday at 06, UK employment reports will publish, and changes in unemployment claims (April) are (Prev: 28.2K | Fore: 31.2K).
Canada's inflation report will release on Tuesday at 12:30. The Canadian central bank was the first to stop raising its interest rate. If the Canadian CPI report shows a decrease in inflation, it can indicate that the Canadian central bank will be the first to reduce its interest rate, therefore, the Canadian dollar can weaken. Also, on Thursday at 15:00, BOC Gov Macklem will speak.
ECB President Lagarde will give a speech on Tuesday at 14:00, Thursday at 09, and Friday at 19:00.
At 09 on Wednesday, the Eurozone Final CPI data for April will publish.
BOE Gov Bailey will speak on Wednesday at 09:50.
On Thursday at 01:30, the Australian employment reports will be released, with changes in employment (April) (Prev: 53K | Fore: 25K) and unemployment rate (April) (Prev: 3.5% | Fore: 3.5%).