European futures are trading higher, taking their cues from Wall Street where the stock indices closed at a record high on Friday. However, traders are mostly cautios and this theme becomes a lot more prominent when we look at the US futures. The reason for this is the upcoming Federal Reserve’s monetary policy which will be taking later this week.
The Fed is unlikely to change its policy rate, and its tone toward the economy may influence the stock market.
Stock traders should keep in mind that the Federal Open Market Committee (FOMC) meeting, which will take place over two days beginning June 16, is likely to influence investor behaviour this week. Despite analysts’ belief that the central bank will not make any changes and will maintain its dovish stance on the economy, its projections for inflation, interest rates, and the economic outlook may cause market disruption.
What is important to note is that officials believe that rising inflation is unlikely to be a problem because it is said to be caused by supply-side constraints and bottlenecks caused by the rapid recovery from the coronavirus pandemic. Bond investors anticipate that the Fed will reiterate that its dovish policies are appropriate for the current macroeconomic environment and that it is too early for the Fed to taper its purchases of Treasury and mortgage-backed securities.
The growing influence of China around the world has been a major source of concern for the United States and other Western countries. This was also a major agenda item at the G7 meeting, where leaders decided to compete with China’s Belt and Road Initiative. The G7 countries intend to direct billions of dollars to developing countries to assist them in dealing with climate change. President Biden has proposed a “democratic” alternative to Chinese loans, which the West sees as a way for China to increase its influence over other countries.
Traders should understand that this strategy could be interpreted as hostile behaviour toward the world’s second largest economy, leading to an increase in geopolitical tensions and making investors concerned about financial market performance in upcoming months.
According to the International Energy Agency (IEA), demand for oil will reach 5.4 million barrels per day by the end of 2022. This particular guidance is perceived as positive by traders who have been pushing the oil prices higher for the past few weeks.
As the economy continues to recover from the coronavirus, OPEC and its allies will need to increase supply to meet the surge in consumer demand.
Having said that, traders should keep in mind that the ongoing nuclear deal negotiations between the US and Iran are likely to take effect soon. Iran is in a strong position to increase its oil supply in a relatively short period of time, which could result in a significant retracement of global oil prices.
The precious metal is losing some of its mojo as the price has moved away from the 1900 price level. However, the current retracement in the gold price doesn’t impose any long-term threat to its uptrend. That is because gold prices are projected to rise due to a surge in inflation. The CPI reading in the United States rose in May, culminating in the highest yearly gain in more than thirteen years. The consumer price index rose by 0.8 percent in April and 0.6 percent in May, the largest increase since 2009. This should continue to provide more strength for the gold price.
Bitcoin is on the move today and traders have found their courage to push the Bitcoin higher on the back of important news. Elon Musk, the CEO of Tesla, stated on Sunday that his company will reconsider transactions with the infamous cryptocurrency once there is reasonable assurance that crypto miners are using clean energy. As a result, there is positive sentiment towards Bitcoin. The most important price level is of course the 50K for Bitcoin as only then we could see that Bitcoin is completely out of danger. But in the short term, we are focused on the 40K price level. Traders are also watching the 200-day SMA on the daily time frame and if the price breaks above this moving average, that will be the first bullish signal for the bitcoin price.