Stocks little changed on hopes Fed to remain dovish and EZ to stabilize

Wall Street is having a slow start to the trading week as stocks are up slightly while the dollar is mixed, in what will be a jammed pack week full of major market moving events. Both Eurozone first quarter GDP and the FOMC rate decision are expected to support the dovish argument that easy monetary policy is still the name of the game.

The eurozone remains weak and the advanced quarterly first quarter GDP reading is expected to tick higher from 0.2% to 0.3%. Today’s confidence data did not do any favors in bolstering up rebound hopes. Both eurozone’s business climate indicator fell more than expected to 0.42 and economic confidence slumped from 105.5 to 104.0. Europe may be nearing a bottom, but we still need to see better forward looking data from Germany.

Tomorrow, the Fed begins their two-day policy meeting and expectations are high for the Fed to remain patient and stick to the dovish script. Last week’s impressive 3.1% GDP reading is unlikely to faze officials into suddenly nearing a more hawkish stance. US growth is unlikely to remain as strong as data was weighed heavily on one-off effects from trade and inventory buildup.

The dollar may be ripe for a pullback, but we may not see much of a catalyst just yet from European data as the ECB is likely to keep rates lower for much longer. The likely spark plug to dollar selling may need to come from the Fed. The turning point with greenback could happen if the Fed focuses on inflation and hints how low it can go before they will be in a position for an insurance rate cut.

 

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya