Europe Remains Range-Bound For Now

It’s been a relatively calm start to the week so far, with Asian markets overnight trading relatively mixed and offering little direction for stocks in Europe ahead of the open.

Equity markets appear to be in a state of complete indecision right now and as a result have been left range-bound for the last few weeks. Perhaps this suggests that the impressive rebound following the disastrous start to the year has run its course and the central bank’s goal of stabilising the markets has been achieved.

That said, as we saw towards the end of last week, the markets are not in paralysis mode by any stretch of the imagination and with some big risks events to come over the next month, I would be surprised to see this continue for much longer.

The Federal Reserve’s decision to convey a much firmer hawkish tone has certainly woken people up to the possibility that rates could rise over the summer and with that, the markets have perked up as well. Investors had become very complacent on U.S. interest rates and there was almost a sense of what the Fed says is irrelevant, the markets will lead and eventually the Fed will follow. The Fed made it perfectly clear last week that this is absolutely not the case.

Week Ahead in FX – Fed Minutes Put June Rate Hike Back in Play

With market sensitivity to anything U.S. interest rate-related now picking up, today’s speeches from three Fed officials could be important. James Bullard, John Wiliams and Patrick Harker are all due to speak this afternoon and if the message is consistent with those towards the end of last week and the April minutes, investors would be foolish to ignore them. That said, there’s one person’s view that will stand out above all others this week and that is Fed Chair Janet Yellen, who’s opinion we should get this Friday. Should Yellen hint at a June or July hike then I think markets will reluctantly accept defeat.

This morning we’ll get the preliminary manufacturing and services PMI data from the eurozone, France and Germany which may provide a spark early in the session. We’re expecting very marginal improvements here, with the cooling global economic environment this year allowing only gradual advances.

Economic Calendar

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.