Busy week ahead
Next week is a busy one on the economic calendar – a few notes:
Monday: US markets closed to mark Juneteenth.
Wednesday: UK May CPI is up ahead of the Thursday BoE meeting after the April numbers saw core inflation rocketing to a new cycle high and after the strong wage growth and labor market data last week that spiked UK yields higher. Also on Wednesday, we have Fed Chair Powell with his first of two days of semi-annual testimony before a House panel. We have just heard from him in the FOMC presser and the Fed seems very data dependent – doubtful that we get new signals here.
Thursday: Another central bank bonanza, with Norges Bank, the Swiss National Bank and Bank of England all meeting and all expected to hike a quarter point, with guidance important for all, but most anticipation certainly for the BoE, where so much is priced into the forward curve: almost another further 100 basis points beyond the hike next week for the Bank of England in particular. The Turkish central bank will also meet and is expected to normalize its policy rate to something close to actual prevailing rates in the country, so the official policy rate will be bumped from 8.50% to 20% or higher – with an interesting test for the TRY after a step-wise like revaluation post-election. Mexico will also announce its policy rate (no change expected after the long string of hikes and a mere 0.25% hike last time as MXN is increasingly priced for perfection). USDMXN has been a popular carry trade with its fat 11.25% policy rate, note the very steep backups that periodically hit the exchange rate.
Friday: Japan’s National CPI for May, which may challenge the BoJ’s forecast of easing inflationary pressures this year. Also up are the flash Eurozone PMIs for June, which have generally presented a picture of weak manufacturing sector and quite strong Services sector of late and with a slight dip expected for June.
Table: FX Board of G10 and CNH trend evolution and strength.
Note the acceleration in the downside momentum for the JPY in the last two and five days, while the CNH has stabilized (and even rallied against the USD yesterday). AUD leads the charge higher on the combination of hopes for more Chinese stimulus after the rate cuts there this week, on the hawkish shift from the RBA, and on key commodity prices on the rise, including copper. The USD has tilted lower and in determined fashion until proven otherwise.