Markets Expect New Hints From US and EU Central Banks
Traders shift their attention from geopolitics to meeting of the Fed and ECB. The Fed is expected to announce a quarter-point interest rate hike when it wraps up its June meeting Wednesday afternoon, but that rate hike is widely anticipated and there are a few other things that could stir up markets more.
The US central bank will issue a rate statement, along with its latest economic forecasts and its interest rate outlook. Economists predict the FOMC will stick with its March prediction of three hikes this year in the updated quarterly forecasts.
The Fed is likely to bump up its GDP growth forecast from its current median forecast of 2.7% for 2018. Economists currently see second-quarter growth running well ahead of 3%. The Fed could also slightly move its forecast for inflation, which is currently seeing a slight tailwind. The Fed's current forecast expects PCE core inflation at 1.9% for this year, and while PCE has been under 2%, CPI is running above the Fed target of 2%.
The European Central Bank will hold its meeting on Thursday, which will dictate the short-term direction of the euro. The assumption that the ECB could signal an intention to start winding down its large-scale bond purchase program pushed the euro to a three-week high of $1.1840 last week, although the single currency could not hold such a profit.