The Fed meeting, the U.S. debt ceiling increase, the euro zone consumer price index - what events are driving the market this week?
There is uncertainty in the market ahead of important events later this week. The currency market is seeing a slight rebound in the dollar ahead of the Federal Reserve's two-day monetary policy meeting. At the same time the debate over the debt ceiling in Washington is intensifying. Meanwhile, euro inflation is slowly rising ahead of Thursday's European Central Bank meeting.
- Global markets await the outcome of the Fed meeting
- The U.S. debt ceiling
- Inflation in the eurozone remains high, but core prices show decline
Global markets await the outcome of the Fed meeting
The currency market is seeing a moderate recovery in the dollar, while the stock market is showing mixed trading dynamics
The Fed's two-day policy-setting meeting is due to begin later today.
The U.S. central bank has aggressively tightened monetary policy over the past year in an attempt to ease inflationary pressures. The market is concerned that the Fed's tighter policy could have a negative impact on further economic growth. Last week's first-quarter gross domestic product data pointed to sluggish overall activity in the world's largest economy.
Many analysts believe that these factors, as well as new problems in the banking sector (bankruptcy of First Republic Bank and the subsequent takeover of most of its assets by JPMorgan), will force the Fed to pause after raising the rate by 25 bps on Wednesday.
The U.S. debt ceiling
U.S. Treasury Secretary Janet Yellen spoke to lawmakers in Washington, warning that the government could not meet its obligations as early as June 1 unless an agreement is reached to raise or suspend the debt ceiling.
Goldman Sachs economists tentatively put the so-called "X-date" - that is, the day when the Treasury can no longer meet its obligations to debt holders - sometime in late July. Janet Yellen says the "X-date" will be June 1.
Yellen's comments were echoed by the Congressional Budget Office, which also estimated that the Treasury would run out of money by early June, citing weaker than expected tax revenues.
The Biden administration has long said it would not meet with McCarthy about the debt limit while Republicans in the House of Representatives demand that any deal come with significant cuts in important spending items. But as the "X-date" approaches, it appears that the White House will face even more pressure to join the negotiations.
Inflation in the eurozone remains high, but core prices show decline
Inflation in the euro area rose to 7.0% year-on-year, in line with market expectations. The data published today suggests that price growth remains solid. This fact boosts interest in the ECB's decision which will be announced later this week.
Most experts agree that the ECB will raise interest rate at its meeting on Thursday. However, forecasts differ on whether the ECB will raise rates by 25 basis points or act more aggressively and raise rates by 50 basis points.