Expect heightened volatility across global markets as major central banks prepare to announce interest rate decisions in the upcoming week. Traders are closely monitoring the Federal Reserve's July meeting, where a 25 basis points increase to 5.25%-5.50% is widely anticipated. The key focus will be on the Fed's forward guidance, with a hawkish stance potentially boosting the U.S. dollar while exerting downward pressure on gold prices and risk assets like stocks.
Meanwhile, the European Central Bank (ECB), led by Christine Lagarde, is also expected to implement a quarter-point rate hike. However, the ECB may take a cautious tone regarding further tightening due to the eurozone's weakening growth. Such uncertainty could prompt a bearish reversal for the euro.
The Bank of Japan (BoJ), on the other hand, is likely to maintain its current policy settings, though discussions about altering the yield curve control program in the future could be on the horizon if inflation continues to rise steadily. Depending on the BoJ's guidance, the Japanese yen may either rally or weaken against higher-yielding currencies.
In addition to central bank decisions, market participants should closely monitor the release of the second-quarter US gross domestic product report and June PCE data, as they can provide valuable insights into the health of the US economy and inflation trends. Stronger-than-expected results may support the case for further tightening by the Fed.
Simultaneously, the ongoing earnings season will be a major point of interest for traders. Notably, several top technology companies, including Microsoft, Alphabet, and Meta, are set to announce their quarterly results. The tech sector has witnessed significant growth due to the artificial intelligence boom, and these companies will need to demonstrate earnings resilience, margin expansion, and revenue and EPS growth to maintain their premium valuations and performance.
Overall, the convergence of central bank decisions and tech earnings will likely shape market sentiment in the coming week, presenting both opportunities and challenges for investors. Keeping a keen eye on these developments will be crucial for navigating the dynamic financial landscape.