Key Economic Events and Reports of the Week Ahead
The USD saw massive retreat last Friday amid two key news from the US:
- Biden's infrastructure plan is one step away from approval;
- Monthly inflation gain in the US in May and consumer spending missed expectations.
Both news reignited demand for risk which led to increased bearish pressure on USD. Also, the odds that the Fed will move to policy tightening earlier have decreased, which means that the search for yield will likely intensify.
The next week will likely develop this theme, paying attention to the news and reports that may contribute to the risk-taking. Investments in the assets of the countries where central banks are actively raising rates are likely to continue to increase. First of all, these are emerging markets such as Russia, Brazil, South Africa, Mexico. Commodity markets may also experience some upturn on the US spending expectations, boosting demand for commodity currencies such as AUD and NZD. Among the key reports next week, it is worth to keep tab on the ADP report on Wednesday and Friday's Non-Farm Payrolls report. An increase by 675K is expected and, if it does not meet expectations, the dollar will likely accelerate decline, as the Fed will have to keep rates low for even longer.
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