FOMC Minutes release

The US dollar was not able to hold its previous gains and lost ground against its major counterparts over the past week. Following the FOMC meeting’s minutes release, it became clear that the Fed will continue its stimulus measures as Chairman Bernanke said the central bank has no intention to change its aggressive policy in the near future.

Forex markets were very quick to react on the news and just a few hours were needed for the dollar to plummet sharply against both the euro and the pound. At the end of the week, the EUR/USD traded at 1.3067, or having a 239 pips gain, while the GBP/USD added 204 pips to its value, closing at 1.5103 on Friday. The USD/JPY lost 186 pips, with the last quote for the week being at 99.34.

Indices
FOMC minutes and Bernanke’s subsequent statement were expected with great interest by the capital markets as well. After the central bank’s firm stance became evident, the major US indices took the upward movement, registering significant weekly gains. The S&P500 closed at the record 1,678 points, or 2.84% higher; the Dow increased its value by 2.14% to 15,452 points, while the Nasdaq100 rose by 3.81% to 3,075 points. Additional boost in investors’ optimism came from the better-than-expected financial results of JPMorgan Chase and Wells Fargo.

Meanwhile, European markets were trading mixed in the past week. Germany’s DAX30 and France’s CAC40 rose significantly by 4.61% and 1.99%, respectively, while Spain’s IBEX and Italy’s S&P/MIB reported falls within 1%.

Commodities

Bernanke’s speech also triggered action in gold and silver buyers. Gold (XAUUSD) added 5.09% to reach $1,284 per troy ounce, while silver (XAGUSD) rose to $19.91, or 5.57% per troy ounce.

What to expect this week?
This week’s start is mainly focussed on reports from the US and China, as the majority of economic events on Monday are coming from the two countries amid a closed Japanese market due to a holiday and a lack of data from the Eurozone countries. China has already published its GDP, with figures showing another slow growth for a second consecutive quarter.

The country’s economy increased by 7.5% YoY compared to 7.7% for the same period the previous year, while it also revealed slightly weaker-than-expected Q2 results at 1.7%, opposite forecasts for a 1.8% rise. One of the main reasons contributing to the country’s lower GDP growth lays in the declining world demand for Chinese goods. However, many analysts commented that the current GDP results in the case of China are not a negative signal and it is still a healthy pace of growth. Later in the session, the US is due to publish its Retail Sales for June, while New Zealand will publish its Consumer Price Index, both on quarterly and annual bases. Tuesday will see the release of a series of UK economic data, including the country’s Consumer and Retail Price Indexes, both for QoQ and YoY bases, and the Bank of England Inflation letter. Other highlights of the day will be the meeting’s minutes of the Reserve Bank of Australia and the Bank of Japan, the Consumer Price Index for both – the Eurozone and the US, along with Germany’s ZEW Survey on economic sentiment.

Wednesday’s focus will shift to the Bank of England meeting’s minutes and the country’s Claimant Count Change as well as the US Building Permits data for June. Thursday will produce the UK’s Retail Sales on quarterly and annual bases, along with the US Initial Jobless Claims. Friday’s main entries will come from Germany’s Import Prices for June and Canada’s Consumer Price Index, as the trading day will be rather quiet in terms of economic events.

Outside of the economic calendar, some leading US companies will publish their financial results and heat the market as the earnings season is gathering speed: Citigroup (C) on Monday, Coca-Cola (KO) and Johnson & Johnson (JNJ) on Tuesday, Bank of America (BAC), International Business Machines (IBM), American Express (AXP) and Intel (INTC) on Wednesday, Verizon Communications (VZ) on Thursday and General Electric on Friday.