The month of June was remarkably quiet with the exception of the UK’s snap elections. The so-called strategy backfired against the Theresa May’s Conservative party. Despite getting a majority, the political party was still short of getting a majority in the parliament. Political deal making continues. Alongside, the EU – UK Brexit negotiations have also started although no major inroads were made so far.
Elsewhere, the US Federal Reserve hiked the short-term interest rates by 25 basis points as expected. The rate hike came amid doubts on the future prospects for monetary policy tightening. The Fed also signaled its intentions to unwind the massive $4 trillion balance sheet that it has amassed during its QE operations.
Further details are expected, while at the same time the markets are still doubtful on how long the Fed’s tightening will continue given the weakness in the US economy.
Oil prices continued to slump despite the May’s OPEC decision to keep production levels from last November. The fact that the US shale oil industry continues to make up for the production cuts has given rise to concerns that the OPEC’s production cut could be ineffective.
The month ahead: July 2017
The month of July is likely to be a slow month in the markets. No major central bank decisions are expected during this month. Trading is also likely to slow down with the markets heading into the summer months.
ECB Monetary Policy Meeting – No Changes Expected (July 20th)
The European Central Bank will be meeting on July 20th for its monetary policy meeting. The central bank is expected to keep monetary policy steady at the July meeting.
Still, the number of dissents is growing significantly with the German Bundesbank President Jens Weidmann recently telling reporters that the ECB should begin to tighten its policies. This was later reflected by the surprisingly hawkish comments from the ECB Chief Mario Draghi who said that the central bank could introduce another tapering to its QE including adjusting its monetary policy tools as well.
Read more: https://www.orbex.com/blog/2017/06/fx-markets-monthly-outlook-july-2017/