Earlier this week, a series of weaker-than-expected economic data, including "horror data", existing home sales and initial claims, boosted market expectations for a rate cut by the Federal Reserve in September. However, Friday's PMI survey showed that overall business activity remained resilient, which may reduce the urgency of the Fed's rate cut. In addition, compared with other central banks, the Fed's hawkish stance has become particularly prominent. This week, the Swiss National Bank started its second rate cut, the Bank of England signaled that a rate cut was imminent, and many Fed officials believed that there might only be one rate cut this year.

Spot gold accelerated its decline on Friday after the release of PMI data, erasing all losses during the week. The US dollar index hit a new high since early May. Although US stocks closed higher for the week, the rise of large technology stocks was obviously weak. Among them, Nvidia's stock price fell for two consecutive days, and its market value evaporated by more than US$200 billion. In terms of crude oil, international oil prices rose to a seven-week high on Thursday as the situation on the Lebanese-Israeli border escalated, but fell back on Friday as negative economic news could hit the demand outlook.

The last week of June saw relatively light macroeconomic data, and next Friday's inflation data, which is the Fed's favorite, may cause some ripples, as market participants hope to judge whether the trend of slowing inflation will continue. The focus in Europe remains on political chaos, with the first round of voting in France's early legislative elections set to take place on June 30.

The following are the key points that the market will focus on in the new week (all in Beijing time):

Central bank dynamics: Economic data reveals complex signals, the Fed remains hawkish

Fed:

At 2:00 on Tuesday, Daly, 2024 FOMC voting member and President of the San Francisco Fed, will speak on monetary policy and the economy.

At 19:00 on Tuesday, Federal Reserve Board Governor Bowman will deliver a speech on monetary policy and bank capital reform

Fed Governor Bowman will deliver a keynote address at a Midwest webinar hosted by the Federal Reserve Banks of St. Louis, Chicago, and Kansas City at 2:10 a.m. on Wednesday.

At 4:30 on Thursday, the Federal Reserve will release the results of its annual bank stress test

At 18:00 on Friday, Barkin, 2024 FOMC voting member and Richmond Fed President, will deliver a speech

At 18:20 on Thursday, Barkin, 2024 FOMC voting member and Richmond Fed President, spoke at the "Central Bank Series: Paris" conference

On Friday, S&P Global released data showing that the U.S. Markit PMI data for June was better than expected across the board, with service sector activity reaching its fastest growth in more than two years, indicating that the economy will usher in encouraging growth in the second quarter. At the same time, the survey also brought good news on inflation resistance, with sales price inflation cooling again after a slight increase in May, falling to one of the lowest levels in the past four years. However, while the Fed may have reasons to cut interest rates, the risk of a preemptive rate cut triggering a re-acceleration of the economy remains a concern for officials.

"The Fed can cut rates, but it doesn't need to do so just yet," Jefferies said in a note on Friday, noting that strong fundamentals for the economy suggest the Fed doesn't need to do any easing just yet. It added: "The risk of a resurgence in inflation is too great to warrant a preemptive rate cut." Jefferies acknowledged that the U.S. economic recovery has surprised many, and the firm ultimately abandoned its recession forecast. It is still sticking with its forecast that the Fed will cut rates once this year, in November or December.

Jefferies' forecast for one rate cut this year is in line with the Fed's. At the June FOMC meeting, policymakers lowered their forecast for one rate cut this year from three as inflation was expected to remain higher than previously expected. Fed officials have spoken intensively this week, unanimously emphasizing the need to wait for more evidence of cooling inflation before cutting rates. Recent comments from Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker also suggest the Fed will cut rates once this year, most likely at its December policy meeting. More Fed officials are expected to speak in the coming week.

By contrast, investors expect the Fed’s policy rate to fall by about 50 basis points by the end of the year, according to federal funds futures, and see about a 70% chance of a first rate cut in September. Steven Blitz, an economist at GlobalData TS Lombard, said in a Thursday note that there is a 60% chance that the Fed will surprise markets with a rate cut next month, as weak employment and housing market data could stoke concerns that the Fed is tightening financial conditions too much.

In addition, alarm bells about a banking crisis are being sounded anew. Gareth Soloway, chief market strategist at VerifiedInvesting.com, said there is something "wrong" with the U.S. banking sector, warning that large institutional players are "selling off" shares of large banks. Earlier this week, an article published by the Federal Reserve Bank of New York on the Liberty Street Economics blog pointed out that large U.S. banks are facing spillover risks from non-bank institutions. On Friday, the Federal Reserve and the Federal Deposit Insurance Corporation said that the "living wills" of Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase were flawed and required the four major banks to take remedial measures. Investors may analyze the banking situation through the results of the Federal Reserve's annual bank stress test to be released next Thursday.

Other central banks:

At 7:50 on Monday, the Bank of Japan will release a summary of the opinions of the review committee members of the June monetary policy meeting.

Bank of Canada Governor Macklem to deliver speech at 1:30 a.m. on Monday

A summary of the Bank of Japan's June monetary policy meeting will be released on Monday. The yen came under pressure after the central bank decided last week to delay reducing its bond-buying stimulus until its July meeting to announce details. At a press conference after the meeting, Bank of Japan Governor Kazuo Ueda did not rule out a rate cut in July. But investors are not buying it, and market pricing suggests this, with the probability of a 10 basis point rate hike in July having dropped sharply to around 27%, compared with more than 65% before the rate decision.

All of this suggests that yen traders will be digging into this summary of opinions to get a clearer picture of the likelihood of a July rate hike. If they are disappointed again, the yen could continue to fall. In addition, Tokyo's June CPI data will be released on Friday, and if Tokyo CPI falls back below the Bank of Japan's 2% target again, the yen could take another hit.

Still, with the yen falling for seven straight days and approaching the 160 mark again, the risk of Japanese authorities intervening again is rising sharply. On Friday, Japan's top currency diplomat, Masato Kanda, said the authorities' stance of taking appropriate measures to deal with excessive exchange rate fluctuations has not changed. However, the Bank of Japan's ability to intervene this time may be questionable, as the U.S. Treasury Department put Japan on its currency manipulator monitoring list on Thursday, which was seen as a warning to the Bank of Japan to further intervene in the foreign exchange market. Matt Weller, head of market research at StoneX, said the yen will be the focus of foreign exchange traders next week.

Important data: The Fed’s favorite inflation indicator is coming, is the path of least resistance for gold downward?

Tuesday 20:30, Canada May CPI monthly rate

At 21:00 on Tuesday, the monthly rate of the FHFA House Price Index in April and the annual rate of the S&P/CS 20-city House Price Index in April in the United States

Tuesday 22:00, US Conference Board Consumer Confidence Index for June

At 9:30 on Wednesday, Australia's May weighted CPI annual rate

At 22:00 on Wednesday, the total annualized sales of new homes in the United States in May

At 22:30 on Wednesday, the EIA crude oil inventory and strategic petroleum reserve inventory in the United States for the week ending June 21 were

At 17:00 on Thursday, the Eurozone June Industrial Climate Index, the Eurozone June Consumer Confidence Index Final Value, and the Eurozone June Economic Climate Index

At 20:30 on Thursday, the number of initial jobless claims in the United States for the week ending June 22, the final value of the annualized quarterly rate of real GDP in the first quarter of the United States, the final value of the quarterly rate of real personal consumption expenditures in the first quarter of the United States, and the final value of the annualized quarterly rate of the core PCE price index in the first quarter of the United States

At 22:00 on Thursday, the monthly rate of the U.S. existing home sales index in May

Friday 7:30, Japan's June Tokyo CPI

At 14:00 on Friday, the final value of the UK's first quarter GDP annual rate

At 20:30 on Friday, the annual rate of the US core PCE price index in May, the monthly rate of the US core PCE price index in May, and the monthly rate of personal spending in May

At 22:00 on Friday, the final value of the University of Michigan Consumer Confidence Index in June and the expected one-year inflation rate in June will be released.

Following the unexpected decline in the US CPI and PPI data in May, market participants will closely watch the US PCE data for signs of further easing of inflation, thereby providing more flexibility for the Fed's path of rate cuts.

As the Fed's preferred inflation indicator, both the overall and core PCE data in the United States have fallen sharply from their peak in 2022, but are still above the target level of 2%. Fed Chairman Powell pointed out at the recent meeting that policymakers still need to have "greater confidence" that inflation will fall before easing policies. The year-on-year growth rate of the overall PCE in the United States in May will drop from 2.7% to 2.6%, while the month-on-month growth rate will drop from 0.3% to 0%; the year-on-year growth rate of the core PCE is expected to drop from 2.8% to 2.6%, and the month-on-month growth rate will drop from 0.2% to 0.1%.

If the data confirms that inflation is still cooling, it could further solidify expectations for two 25 basis point rate cuts by the Federal Reserve this year and could increase the likelihood of a first cut in September, which would be negative for the dollar. On the other hand, better-than-expected data could push Treasury yields higher and force gold lower. While analyst forecasts for U.S. PCE data have seen few surprises in recent months, analysts' low forecasts make an upside surprise possible.

The final reading of U.S. GDP for the first quarter will be released a day earlier than the PCE data, but any small deviation from the second revision is likely to be overlooked given the end of the second quarter. The Conference Board consumer confidence index for June, released on Tuesday, will reflect the performance of the U.S. economy in recent weeks. "Further weakness in U.S. inflation and/or activity data is now needed to narrow the interest rate gap between the Fed and other central banks to finally drive a new downtrend in the dollar," ING currency strategist Francesco Pesole said in a note.

The U.S. economic calendar lacks data that could have a significant impact on gold prices in the first half of next week. Therefore, investors will continue to focus on headlines regarding the conflict in the Middle East. A further escalation in geopolitical tensions could give gold bullish momentum.

However, from a technical point of view, the trend of gold is not optimistic. Fxstreet analysts said that gold resumed its downward trend on Friday and broke through the neckline of the head and shoulders top. In other words, the path of least resistance for gold is currently downward, and the next support level will be $2,300. Once it is lost, the price of gold will fall to the low of $2,277 on May 3, followed by the high of $2,222 on March 21, and there is further room for downside. The bears may target the target price of the head and shoulders top pattern at $2,170-2,160. On the contrary, if the price of gold rises above $2,350, it will face more key resistance levels, such as the cycle high of $2,387 on June 7, followed by the psychological level of $2,400.

Canada's CPI data will be released next Tuesday. Earlier this month, the Bank of Canada became the second central bank in the G10 group to cut interest rates by 25 basis points, and Governor Macklem said that if inflation continues to cool, "further rate cuts are reasonable." Investors currently expect the Bank of Canada to cut interest rates again in July with a probability of about 62%. If next week's data shows that inflation continues to trend downward, this probability may rise further, putting pressure on the Canadian dollar.

Australia will also release CPI data for May on Wednesday. Australia's inflation rate has been higher than other major economies, and RBA officials discussed the possibility of a rate hike at their meeting on Tuesday. Therefore, if CPI confirms the persistence of price pressures, traders will continue to view the RBA as more hawkish than other major central banks, which could help support the Australian dollar.

Important events: The first round of voting in the French parliamentary election is imminent, and the key support of the euro is in danger again

Traders in Europe will be focused on political turmoil in France, where bonds and bank stocks could be vulnerable to jitters ahead of the first round of National Assembly elections on June 30. Polls show strong support for Marine Le Pen’s far-right National Rally party, raising concerns about potential political deadlock and excessive fiscal spending.

"Overall, FX markets seem reluctant to push for any major moves ahead of the French election in late June/early July as that remains the biggest focus for European FX markets," said Eric Nelson, macro strategist at Wells Fargo in London. The euro fell for a second straight week against the dollar this week after a series of preliminary June surveys showed French services activity contracted this month while German economic activity slowed. Analysts will continue to watch data for signs of the euro zone's economic recovery, especially any signs that the upcoming French election will hurt market sentiment.

Shaun Osborne, chief foreign exchange strategist at Scotiabank, believes that the preliminary PMI data report for the eurozone this week reflects an unexpected slowdown in economic activity, causing the euro to fall to the support of 1.0675, the low point in mid-June. Investors may link the weak performance of the region's economy to the early general election in France. If the euro loses this level against the dollar, it will face the risk of falling to 1.06 or even lower. The currency pair may be able to stabilize above 1.06, but it needs to quickly regain 1.0750 to really get out of danger.

Company financial report: Nvidia's market value evaporated by $200 billion in two days, is the U.S. stock market about to peak?

The first quarter earnings season has basically ended, and U.S. stocks remain strong, with significantly less volatility in the process of climbing to historical highs. The S&P 500 has not fallen 2.05% for 377 consecutive days, which is the longest since the financial crisis, according to FactSet data compiled by CNBC. But the recent rise in large technology stocks, which are the engine of the U.S. stock market, has taken a breather, raising concerns that the market may have peaked.

The hot Nvidia stock reversed in the last two trading days of this week, losing its short-lived title as the world's largest company by market value. The stock's decline on Thursday marked a "bearish engulfing" pattern, which usually indicates that the previous upward momentum is weakening. The high concentration of U.S. stocks makes the stock price performance of these giants crucial to the broader market. This year, the S&P 500's total return has exceeded 14%, of which about 60% is driven by five companies, including Nvidia, Microsoft, Meta Platforms, Alphabet and Amazon.

For U.S. stocks, what kind of price action do we need to see to confirm that the market has peaked? David Keller, chief market strategist at Stock Charts, said that in terms of short-term reversal signals, the recent gap in the S&P 500 near 5,400 is the first "bottom line." As long as the S&P 500 remains above this level and also remains above the trend line formed by the major lows since October 2023, the market remains very bullish.

However, if the S&P 500 weakens further, then the most important level to watch is 5,200, which would represent a potential pullback of about 5% from the recent market peak. 5% pullbacks are actually quite common, even during historical bull markets. But if the S&P 500 falls below 5,200, then the index could fall all the way to 4,950. If there is enough downside momentum that even this 200-day moving average cannot hold, then a deeper and more prolonged correction is very likely. Conversely, above 5,200, any pullback in the S&P 500 will be temporary.

The article is forwarded from: Jinshi Data