Why This Is the Most Important Week in Markets This Year : Introduction
This week will be the most important week in markets this year. The decisions made during the week will be consequential to the markets and the world peace in general.
The week starts on a high note. It starts after a weekend full of disappointments among the G7 allies. During the weekend, the 7 most powerful western powers gathered in Canada for the annual G7 meeting. It started on a contentious note after the US president’s late arrival to the meeting. He arrived late and left early before the meeting ended. When travelling to Singapore, he sent a tweet asking his representative not to sign the communique. This means that the Western alliance that has existed for more than 70 years is having its biggest challenge ever. This week, the markets will react to this.
On Tuesday, the US president will meet with his North Korean counterpart. This will be the first such meeting between the leaders of the two countries in decades. In the meeting, the two unconventional leaders will make decisions that will move markets. The North Korean leader might agree to denuclearize in exchange of financial prosperity. The US has promised that its companies will move to North Korea to provide capital and investments.
The challenge for the meeting will be on how to find a common ground. This is especially after the United States track record of breaking promises. After Libya’s Gadaffi accepted to denuclearize, the western allies attacked and deposed him. The same was true in Iran. On the other hand, Kim Jong Un wants to develop his country. This is impossible to achieve at a time when the country is faced with hundreds of sanctions.
Other than the North Korean issue, central bankers will meet this week to decide on the interest rates. The most important central bank this week will be the European Central Bank (ECB). This week’s ECB meeting will be important because the officials will decide on whether to start unwinding the quantitative easing program in September as planned. As such, traders will be waiting for the decision from the officials on whether the QE will be ended and if it does, whether interest rates hike will happen. There is a likelihood that this will happen especially after the high inflation rate reported a month ago.
The Federal Reserve monetary policy committee will also meet this week. The officials are expected to hike rates. The most important decision will be on the pace of rate hikes. Some analysts expect the fed to continue raising rates while others believe the Fed will now pause the rate hikes. Whatever the outcome, their decision will be increasingly important to the traders.
On Friday, the Bank of Japan will also meet to make a decision on interest rates. The bank will not hike rates but traders will watch out for the language of the statement that will come out of the meeting. Will the officials commit to future rate hikes and the exit of QE?
Apart from that, this week, we will get inflation data from the United States. This data will come out tomorrow and could help the Fed officials make a decision. Other important data we expect this week are the employment data from the UK, crude oil inventories, and the employment data from Australia.