Following a week of volatility that has seen many major events including the US CPI and Fed and ECB meetings, next week will be the Bank of England and National Bank interest rate decisions. Swiss. Inflation data will be published in the United Kingdom, and the preliminary Global PMI will reveal the state of the world economy. Comments from Fed and ECB officials will be the focus of much attention.
Here’s what you need to know for the week ahead:
The start of the week can be relatively quiet as the US stock and bond markets close on Monday for the June 20th celebration.
The People’s Bank of China has already lowered interest rates and could continue to do so. The Wall Street Journal has reported that China is planning major steps to revive its economy, including new infrastructure spending.
Despite the gloomy outlook and recent rate hikes, global equity markets ended the week with gains. Expectations that the monetary policy tightening cycle is coming to an end, signs of slowing inflation and some encouraging employment data have all helped boost market sentiment.
The Dollar Index had its worst week in months as risk appetite weighed on the greenback despite the hawkish tone of Federal Reserve Chairman Jerome Powell. The DXY fell to 102.00, the lowest level in four weeks. US data showed that inflation continues to slow. With a live FOMC meeting in July, US economic data has gained more prominence, as well as comments from Fed officials. Fed Chairman Powell will present the semi-annual monetary policy report to the Congress on Wednesday and Thursday. He is expected to reiterate what he said after the FOMC meeting.
EUR/USD had its best week in months, breaking above 1.0900. The bullish tone has put the 1.1000 area back on the radar. The European Central Bank (ECB) raised rates by 25 basis points, as expected, signaling another hike in July. The surprise came from the upward revisions to core inflation forecasts. The key report for next week will be the flash PMIs for Friday.
USD/JPY posted its highest weekly close since October, above the 141.50 zone. The Japanese yen hit multi-year lows against many of its rivals, weighed down by the Bank of Japan’s (BOJ’s) dovish stance, risk appetite and rising government bond yields. As expected, the BOJ kept its monetary policy stance unchanged. The central bank will have the opportunity to signal changes in its policy at the July meeting with new macroeconomic projections. Japan’s national consumer price index will be released next Friday.
GBP/USD accelerated higher, rising for the third week in a row and reaching the highest levels since April 2022. On Friday it broke above 1.2800. Despite the ECB’s supportive stance, the EUR/GBP pair fell back towards 0.8500. The Pound outperformed during the week, buoyed by encouraging UK economic data, particularly strong wage growth numbers. Next Thursday, the Bank of England will announce its monetary policy decision, and a 25 basis point rate hike is expected. Prior to the decision, UK inflation data will be released on Wednesday.
Wells Fargo Analysts:
Next week’s inflation data will be key in determining the path forward for the Bank of England. While we anticipate additional BoE tightening, another elevated inflation data could lead to a much higher terminal rate than we currently forecast. At this time, we believe that BoE policy makers will hit a maximum rate of 5.00%; however, if core inflation were to increase in May, we would probably revise this forecast upwards to reflect the need for more restrictive monetary policy. Should inflation turn out to be lower than expected, the lower price pressures could ease some of the pressure on the UK economy, although the shift towards interest rate cuts is likely to be some way off.
USD/CHF pulled back from the 20-week SMA at 0.9110 and ended the week below 0.9000. Meanwhile, the EUR/CHF gained 80 points during the week, rebounding from monthly lows and posting the highest close in two months. The Swiss National Bank (SNB) will hold its monetary policy meeting next Thursday. A rate hike is expected, and a 50 basis point increase is not ruled out, following hawkish comments from Chairman Thomas Jordan, and taking into account that the SNB meets once a quarter.
The NZD/USD pair continued its recovery and broke above the 0.6200 mark, gaining 1.60% over the week. New Zealand GDP figures for the first quarter came in below expectations. The Reserve Bank of New Zealand (RBNZ) has ended its tightening cycle, while its neighbor, the Reserve Bank of Australia (RBA), unexpectedly raised rates last week and may do so again. The divergence has prompted the AUD/NZD, which broke above 1.1000, reaching the highest level since February.
AUD/USD broke above the medium-term resistance at 0.6800 and approached 0.6900, recording the highest close since January. The pair was boosted by US dollar weakness and strong Australian jobs data, which triggered expectations of more RBA rate hikes in July and August. Next Tuesday, the RBA will publish the Minutes of its last meeting.
USD/CAD it broke below the 1.3300 zone and fell below 1.3200, the lowest level since August. Bank of Canada meeting minutes and retail sales data will be released next week.
The USD/TRY it stabilized around 23.60, after rising nearly 20% in the month following President Erdogan’s victory. It is expected that next Thursday the Central Bank of the Republic of Turkey (CBTR) will sharply raise the rate of double operations, after the strong depreciation of the Turkish Lira. If the CBTR does so, it will signal a departure from its previous policy and could help the TRY.
The South African Rand was the best performing currency of the week as the USD/ZAR fell back to 18.00. The Mexican Peso rose for the fifth consecutive week against the Dollar, with the USD/MXN approaching 17.00, the lowest level since 2016. Next Wednesday, the Central Bank of Brazil and the Bank of Indonesia will have their monetary policy meeting.
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
