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Below the Quote on Coming Week Market Outlook by Alex Volkov, Market Analyst at VT Markets

Week ahead: PCE data to play integral role in Fed rate decisions

The Dow Jones and S&P 500 both ended their multi-week winning streaks, a shift driven by economic data that came in hotter than expected. This unexpected strength in the economy has prompted many to push back their expectations for Federal Reserve rate cuts, creating caution in interest rate-sensitive sectors.

Meanwhile, the Nasdaq is set to extend its winning streak, buoyed by Nvidia’s standout performance. Nvidia’s earnings report was a highlight, with shares surging 9.3%, reflecting strong investor confidence in the company’s future prospects. Commodity performance

Crude oil prices fell 3.3%, trading at $76.90 per barrel, impacted by robust US economic data and heightened rate expectations. Gold similarly dropped by 3.3% to $2333, as higher US yields and a stronger dollar weighed on the precious metal.

What to focus on this week

With the country’s monthly CPI Indicator coming in on Wednesday this week, traders and analysts are keenly watching for signs of inflationary trends that might influence monetary policy decisions. Australia's Q1 2024 headline inflation rose by 3.6% year-over-year, exceeding market expectations of 3.4%. Trimmed mean core inflation also increased by 4% year-over-year, surpassing the anticipated 3.8%. In the Euro Area, April headline inflation remained stable at 2.4% year-over-year, while core inflation fell for the ninth consecutive month to 2.7%. Market expectations are for headline inflation to remain at 2.4% year-over-year and core inflation to ease to 2.5%. With the inflation report for the Euro Area due on Friday, 31 May, traders are closely monitoring these figures as they could significantly impact the European Central Bank's (ECB) policy decisions. A 25 basis points rate cut by the ECB is almost fully priced in for June, contingent on no inflationary surprises. The upcoming report will therefore be pivotal in shaping market sentiment and the ECB's next moves.

The Federal Reserve, for one, has indicated a willingness to hike rates further if necessary, reducing the probability of a rate cut in the near term. This upcoming report will be essential in determining the Fed's monetary policy direction. This week, companies reporting include Salesforce, Kohls Corp, Costco Wholesale Corp, Nordstrom, Marvell Technology, and Zscaler. Their earnings results will provide further insights into sector-specific performance and broader market trends.

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