Fed rate cut hopes lift global markets

Global equities rebounded last week after Fed chair Powell's comment central bank ‘will act as appropriate to sustain the expansion’ raised hopes Federal Reserve may soon implement rate cuts. President Trump’s decision to suspend imposition of tariffs on imports from Mexico on Friday also buoyed investors’ risk appetite. The S&P 500 jumped 4.4% last week while the ICE US dollar index turned 1.2% lower.

All six major developed market stock indexes recovered from previous week’s wide losses. Dow recorded the sharpest rebound: it rallied 4.7%. Half of six major currencies reversed previous week’s dynamics against the US dollar, while the range of major currency pairs’ weekly fluctuations almost doubled as it shifted up. The Canadian dollar was the leader in terms of percentage change: it gained 1.7% against the US dollar.

Developments on US-China tariff dispute front will remain in focus this week. And US inflation report due on Wednesday with retail sales data on Friday will be closely watched to gauge the likelihood of a Fed rate cut as early as in July after the weak May jobs report.