The strength or weakness for this week entirely depends on the global macroeconomic data which will dictate the trading action. Commodities have been under pressure for the last few weeks and this has been the major focus among traders. A multi year low for commodity prices is raising concerns that deflation which, many though left the town and growth has taken its place, is surely not the case. Given that this is a massive week for the U.S. dollar, as the Fed is due to conclude their meeting on Wednesday and the U.S. Q2 GDP data also due on Thursday, it is going to be increasingly intense for traders to gauge the prospects and timing of raising the U.S. borrowing rates.
Miss Yellen, the Fed chairwomen, delivered a very clear message during her last meeting that she is going to roll the dice this year to raise the interest rate. September appear to be the most likely month when the first rate hike could take place and this is what traders will focus on Wednesday if she is going to provide any clarity of this timeline. The question why this matters the most is obviously the underlying strength which this brings for the king dollar. The dollar strength is hunting the commodity price and the last week most of the companies which missed their earnings target blamed this on the stronger dollar.
The Q2 GDP data for the UK, Canada and Spain will also be released this week and this will drive the trading action in these markets. The weakness in the Chinese economic data which we have seen almost on a consistent basis for the past few weeks will prompt the People Bank of China to assure investors that the country’s economic growth is not as fragile as many are estimating. The new forecast for the Chinese growth is shockingly low and it could drag the economy’s growth to 4-5 percent. This is not a normal number at all, in fact, when you compare this reading to country’s previous track record, it feels like that China has negative growth- although this is not the reality.
Uncertainty still surrounds Athens and its new bailout package remains the main focal point for traders. Greeks have changed their attitude and have put restriction on creditors in relation to whom they should speak and this could make the upcoming negotiations more troublesome. The country needs to secure the new bailout package by 20th of August.