French parties race to block Le Pen’s RN. Powell testifies before Senate Banking Committee. US CPI data to shake Fed rate cut bets. RBNZ to leave OCR untouched, focus on language.
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Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. Hello, and welcome to the Weekly Forex Outlook at XM.com. The second round of the French election will take place on Sunday, with Euro traders eagerly awaiting the outcome. In addition, next week in the U.S. Fed Chair Powell will testify before the Senate Banking Committee. And over in New Zealand, Kiwi traders will be keeping an eye on upcoming Chinese data and the RB&Z decision. My Maria Pechertidesen, joining me is Senior Investment Analyst Harlemus Bizuos. So Harlemus, let's begin in Europe, where traders are anxiously anticipating the results of the second round of the French election, which will take place on Sunday. Last Sunday, the far-right National Rally Party led the first round. How likely is it that they will secure an absolute majority in the second round? And what would this mean for the French Government and the Euro? Hello, Maria. Yes, indeed, Lebens National Rally led the first round last Sunday, but left wing and centrist parties formed an alliance and decided to withdraw their candidates in electorates where there is a three-way run-off. That's because they tried to increase their chances of stopping Lebens' party from running the government. Now, the outcome of the European parliamentary elections revealed that the rise of Eurosceptic parties is a negative development for the Euro. Thus, the coordinated attempt to stop Lebens' march in the coordinated attempt to stop Lebens' march was seen as a positive. Now, however, even if the left wing alliance secures victory and the Euro appended with a positive gap on Monday, uncertainty will not vanish as investors may still be here to find out whether this could lead to a stable government. What's more, there is also a chance of having a hang-par government, where a minority government will struggle to pass legislation. This could lead to a prolonged political paralysis given that no elections can take place for at least twelve months. So moving to the U.S. now, Fed Chair Powell will testify before the Senate Banking Committee on Tuesday and on Thursday will get CPI data. What are we likely to see there and how might it impact the Fed's rate path and the dollar? Now this week at the SMB Forum on Central Banking in Central Powell said that they are getting back on this inflationary path, which has supported the market narrative that two quarter point rate reductions may be warranted this year. Now, although Powell is unlikely to deviate much from what he said in Portugal, the Q&A session may include more targeted questions that result more clarity regarding the Fed's future cause of action. Nevertheless, even if Powell insists that there is no urgency to press the rate cut button, whether the market pricing will drastically change could depend more on the outcome of the U.S. CPI data on Thursday. So if we get a further slowdown in inflation, this may convince more market participants to bet on two rate cuts by December and thereby the U.S. dollar may come under more sell pressure. Turning to New Zealand now, the RBN Z will meet during the Asian session on Wednesday. Are any changes on interest rates expected, and what else will Kiwi traders be keeping an eye on? No, there are no changes expected, but investors will pay attention to the bank's language and stance, back in May officials discussed the possibility of raising interest rates, and since then data were largely better than expected, corroborating that whole issue. Yet, investors are expecting slightly more than 40 basis points worth of rate cuts by the end of the year. But with the RBN Z having little reason to shift to L.S. For which stance, a retraction of the May message may prompt market participants to scale back their rate cut bets, which could prove positive for the Kiwi. And Kiwi traders will also pay attention to the Chinese CPA and PPI data, due out just half an hour ahead of the RBN Z decision. And finally, now that the general election in the UK is over and the Labour Party has secured a majority in parliament, what should pound traders be on the lookout for? Ok, next week, pound traders may pay attention to the monthly DDP rate for May, which comes alongside the industrial and manufacturing production numbers for the same month. With the Labour Party securing a majority in parliament, the Bank of England may speed up its easy process on expectations of a more fiscally responsible government. This could prove negative in the future, in the medium term, for the British pound. So improving GDP during the month of May is unlikely to severely ask their market expectations with regards to the Bank of England's policy plans. Thank you for listening to another episode of Global Market Insights brought to you by XM.com. For more in-depth technical and fundamental analysis, be sure to visit www.xm.com/research. [BLANK_AUDIO]
