US inflation data for May showed another acceleration and now investors are eager to hear whether Fed's narrative has changed. US central bank will announce policy decision on Wednesday. Meeting will also include a new set of macroeconomic forecasts. Apart from that, EU-US summit and oil market will be in the spotlight next week.
US CPI inflation accelerated to 5% YoY in May while core gauge jumped 3.8% YoY. The question is what's next? The Fed has played down rising prices for some time and stressed that inflation is transitory. Will this narrative be repeated during the upcoming policy announcement on Wednesday, 7:00 pm BST? Rates are expected to be left unchanged but a new set of macro forecasts may offer some surprises. Meanwhile, markets do not seem to believe that the US central bank will begin tightening with US100 reaching 14,000 pts area this week.
While the US dollar is likely to be impacted by the Fed's policy announcement, the greenback may also get a chance to move on Tuesday, when the US and EU hold a summit. The meeting may be used to reset the trans-Atlantic relationship after it was strained during Trump's term as the US President. EURUSD pulled back this week but continues to trade just 1% below recent post-pandemic highs in the 1.2270 area.
Oil prices reached fresh post-pandemic peaks this week with WTI jumping above $70 and Brent strengthening past $72 per barrel. One risk to the outlook for oil prices is potential return of the Iranian production. The United States wants to reach a nuclear agreement ahead of presidential elections in Iran, scheduled for Friday, June 18. Apart from that, oil may experience elevated volatility during regular stockpiles data releases - API report on Tuesday and DOE report on Wednesday.