Market Prepares for a Risky Week: Important Economic Events to Watch

This week is a crucial week for the global financial market, with a packed schedule of economic events that are expected to impact market dynamics and investor sentiment worldwide. From the highly anticipated interest rate decision by the Federal Reserve to the actions of central banks in Japan and the United Kingdom, every event has the potential to create significant ripple effects. The Federal Reserve plays a central role This week, the focus of attention is the Federal Reserve, which is expected to cut interest rates by 0.25% at its meeting on Wednesday, bringing the federal funds rate to 4.25%-4.50%. The futures market has priced in a 95% probability of this move, reflecting strong consensus among investors and analysts. This potential interest rate cut will mark a change after a year of strong increases to combat inflation. However, inflation continues to pose challenges. The General Statistics Office reported that inflation had risen to 2.7% in November from 2.6% in October. Meanwhile, the US labor market continues to show significant recovery potential, with 227,000 jobs added in November, exceeding expectations. This strength further complicates the decision-making process of the Federal Reserve, as strong employment can sustain inflationary pressures. Adding to the complexity is the upcoming inauguration of Donald Trump on January 20, which may affect the Fed's policy direction. Analysts speculate that the central bank may adopt a wait-and-see approach at the meeting on January 29 to assess how the new fiscal policies under the new administration could impact the economy. Important economic data of the United States needs to be monitored In addition to the Fed, some important data releases will provide detailed information on the health of the US economy: S&P Global Services PMI (Monday): This report will reveal the performance of the US service sector, which is an important driver of economic growth. The November PMI reached 56.1, indicating expansion, but December is expected to slightly decrease to 55.0, reflecting the possibility of weakening. Retail Sales (Tuesday): The retail sales data for November will show how much consumers have spent during the holiday shopping season. October saw a 0.3% increase, and forecasts indicate a modest increase of 0.2%–0.4%. With inflation and high borrowing costs weighing on budgets, the likelihood of a strong spending increase is not high. Estimate GDP Q3 (Thursday): #Write2Win # The final estimate for Q3 GDP is expected to adjust slightly from 4.9% to 4.7%. The adjustment is expected to be influenced by trade balance and inventory levels. Current home sales figures (Thursday): The housing market continues to struggle under the weight of high mortgage rates and limited supply. Data for November is expected to decrease by 2% following a 1.4% decline in October. Global Central Banks Participate in Action Bank of Japan (Tuesday): Japanese banks face a challenging decision as speculation mounts over the possibility of a significant interest rate hike. Inflation remains stable, but political instability further complicates the issue. The failed election gamble of Prime Minister Shigeru Ishiba has left his Free Democratic Party reliant on the Democratic Party for the People, a party opposed to an immediate interest rate hike. What will the outcome be? Analysts predict that the BoJ will delay until spring wage negotiations confirm sustainable wage growth. Bank of England (Thursday): The Bank of England is expected to maintain interest rates at 4.75%. November inflation data, expected to be released a day earlier, may affect this decision. Analysts predict that annual CPI inflation will rise to 2.5% from 2.3% in October, with service inflation likely to reach 5%. While most Monetary Policy Committee members support keeping interest rates unchanged, a mild change could signal a rate cut in 2025. All means something to investors The convergence of these events sets the stage for increasing market volatility. For traders and investors, the focus will be on interpreting the nuances of each announcement - whether it's a interest rate cut, data adjustment, or unexpected inflation news. Central bank commentary, in particular, will be scrutinized for clues about the direction of monetary policy through 2024. As the global economy is facing challenges of inflation, political instability, and changes in monetary policy, events this week may provide important insights into what is about to happen in the global market. DYOR! Write&Earn