Market Will React to FOMC Meeting Minutes and U.S. Debt ceiling

The prospect of a U.S. debt ceiling deal and some favourable U.S. economic data resulted in huge volatility in commodity and currency prices last week.

The U.S. dollar sparked to a seven-week high as another round of favourable economic data further pared back bets on easing by the Federal Reserve. The greenback was also boosted by expectations of a U.S. debt ceiling deal to avert potential default.

The dollar index, a measure of the greenback’s value against six major currencies, touched a new seven-week high of 103.63 and settled at 103.1920 with a weekly gain of 0.47%.

The USDINR pair extended its gain for a second consecutive week after hitting 82.8950. Its highest level since 27 February 2023, settled at 82.8320 up 0.76%.

Bullion prices posted their first weekly losses After 17 April 2023. Gold prices retreated from the weekly high of 61498 and settled at 60379. After hitting a three-week low of 71811, Silver prices settled at 73321, up 0.37%.

Base metals remained under pressure last week. After hitting a weekly low of 710.30, Copper prices settled at 724.15, with a loss of 0.67%. The red metal dropped below its five-month low amid a renewed wave of selling on weaker-than-expected economic data from China. Added to that are growing worries of a U.S. recession this year.

Aluminium prices had a positive trade and settled up by 1.91% at 210.30. Zinc prices extended their fall for a second consecutive week and settled at 225.25, down by 1.98%.

Crude prices were able to gain 1.89% last week. It jumped to one week high of 6060 after U.S. policymakers signalled some progress towards raising the U.S. debt limit and avoiding a default. After four straight weeks of losses, traders also re-entered markets that were significantly undervalued.

However, on the weekend it retreated slightly and settled at 5882 compared to the previous week’s close of 5773.00

Important Economic Data and Events

The focus will turn on US FOMC minutes for the meeting held in May, set to release this week. A spate of Federal Open Market Committee members will speak. Further, U.S. some other economic indicators including Prelim GDP q/q and Unemployment Claims will have to be watched closely.

Talks between U.S. lawmakers over raising the debt ceiling will be key drivers for the entire market during the week.

Later this week, manufacturing activity data for May is also expected. It’s expected to provide more cues on the world’s largest economy. As growth slows in the face of rising interest rates and high inflation. 

Euro Zone and U.K. economic numbers will also reflect the market during the week. The UK is slated to disclose data, including the CPI. Additionally, Wednesday’s BOE Gov. Bailey Speaks will add clutter to Pound.

Furthermore, the market will react strongly to multiple Purchasing Managers’ Index (PMI) numbers from French, German, Europe, and U.K. Core PCE Price Index m/m scheduled to be released this week.