Central Bank Focus: Fed and ECB Meetings Awaited Amid Dollar Struggles and Commodity Currency Strength
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All eyes on central bankers as Fed, ECB meet
The dollar struggled in lackluster trading last week, as the rebound in commodity prices and improving investor sentiment meant the main 2023 trends continue to drive markets: a soft dollar, and a particularly strong showing by commodity currencies.
Latin American currencies continue to shine, and at the other end, we have the Turkish lira, spiralling down week after week as markets lose patience with Erdogan's bizarre fiscal and monetary notions.
After a news-light week, markets are bracing for the Federal Reserve and European Central Bank meetings. Markets are pricing in a one-third chance of a hike from the Fed Wednesday. However, the release of the critical inflation report for May the day before means that some FOMC members likely will not decide their vote until the day of the meeting.
The ECB decision is an easier call, with markets and strategists universally expecting a 25 bp hike; the key there will be the new staff forecasts and the hawkishness of the communications. Expect plenty of volatility.
