US stock indices saw mixed movement this week. On Tuesday, semiconductor stocks experienced a rebound that helped the Nasdaq gain 1.29%, while the semiconductor index surged 5.2%. Sentiment subsequently soured, however. Major tech companies' heavy spending on AI and a fresh spike in oil prices triggered profit-taking. As a result, Nasdaq 100 futures fell back toward 28,700.
The ECB meeting was the currency market's key event. The regulator kept its deposit rate at 2.25% and the main refinancing operations rate at 2.40%. It also left the door open for further monetary policy tightening due to persistent inflation risks. In the UK, inflation slowed from 2.8% to 2.6%, while core inflation figures in Canada also came in below the forecast levels. As a result, GBP/USD fell to 1.3330, while USD/JPY rose to nearly 164.00. After climbing above $4,150, gold retreated to $4,046.
Brent crude oil's price dynamics are continuing to be driven by the unfolding conflict in the Middle East. Attacks on oil tankers in the Red Sea, threats to block Saudi oil shipments, and ongoing restrictions in the Strait of Hormuz have pushed Brent toward the psychological price point of $100 per barrel. The rise in oil prices has once again heightened concerns regarding inflation and the persistence of high interest rates. Future price movements will depend on whether the escalation leads to further supply disruptions or if the parties return to negotiations.
Federal Reserve monetary policy decision
The Federal Reserve meeting will be the coming week's key event. Analysts expect the regulator to keep the interest rate between 3.50% and 3.75%. A slowdown in US inflation allows the Fed to avoid rushing into another rate hike. However, the rise in oil prices to nearly $100 creates a risk that inflationary pressure will return. That's why attention will be on the FOMC's statement and Fed Chairman Kevin Warsh's press conference. If the regulator signals a potential rate hike in September, it would be a positive factor for the dollar but bad news for gold.
The Bank of England's monetary policy decision
The Bank of England will hold a meeting on Thursday, where the regulator is expected to keep its key interest rate at 3.75%. The slowdown in British inflation to 2.6% allows the Bank of England to adopt a wait-and-see approach. However, rising energy costs could lead to a renewed acceleration in inflation in the coming months. At its previous meeting, two members of the Monetary Policy Committee voted to raise the rate. If the number of those in favour of tightening increases or the regulator raises its inflation forecast, it would be good news for the pound.
The Bank of Japan's monetary policy decision
The Bank of Japan will announce its interest rate decision on Friday. In June, the regulator raised its key interest rate from 0.75% to 1%, the highest level in decades. Analysts expect the rate to remain unchanged at the regulator's upcoming meeting. However, a weak yen and rising energy import costs are intensifying inflationary risks. According to a Reuters poll, 86% of economists anticipate a rate hike to 1.25% by the end of the year. If the Bank of Japan confirms its readiness to continue tightening its monetary policy, it could provide support to the significantly oversold yen.