Week of June 19

Interest rate decisions by the Fed, BOJ and ECB were in line with expectations, but the market was left with a perception that the FOMC was dovish as Fed Chair's speech lacked conviction. Markets will have a quieter week to digest the FOMC as Chair Jerome Powell will testify in Congress, and then there are the minutes from the RBA ahead of the expected quarter-point hike by the BOE.

Top Events in Review

The FOMC rate decision was the headline for last week, holding rates steady as was widely expected. However, in the post-rate decision press conference, Fed Chare Jerome Powell insisted that it wasn't a "skip" and that the Fed will remain data dependent ahead of the next meeting. Markets interpreted that as more dovish than expected, which clashed with the monetary policy statement in which the median of FOMC members expected two more rate hikes this year. DXY lost more than 1% in the week.

On other central banking events, the ECB raised rates in line with expectations of another hike in July being still on the table, while the BOJ left policy unchanged despite a weakening yen. In what amounts to the equivalent of a rate cut, the PBOC announced a reduction to the reserve requirement ratio (RRR) and the major lending facility (MLF), aiming to shore up the domestic economy.

UK claimant count was lower than expected, suggesting more resilience in the labour market., whereas New Zealand officially entered a recession by publishing its final GDP figures.

Biggest Market Movers

The US benchmark index, the S&P 500, finally returned to bull territory after recording 20% growth since its last bottom. It rose nearly 3% in the week, with a third of the gains recorded following the FOMC. Nasdaq had a close to 5% spike instead.

Crude prices declined nearly 5% over the week as a surprise build in inventories compounded worries about economic growth but recovered fully, reclaiming control of the $70.00  per barrel handle.

USDJPY hit a 7-month high despite comments of concern from government officials, as traders appear to be increasingly pricing in the BOJ sticking to easing for a long time.

Aussie dollar rallied more than 2% on improved trade conditions and a surprise build in jobs numbers, keeping up the momentum from the surprise RBA hike the prior week. The pair recorded its third straight week of gains but found resistance at 69 cents.

Top Events in the Week Ahead

Trading in the coming week will start slowly with scant data on Monday and the US closed for a holiday.

A Busy Week for the UK

There is a near-unanimous consensus that the BOE will raise interest rates by another quarter of a point and signal more rate hikes at forthcoming meetings. The UK will release May CPI data ahead of the bank meeting, which is expected to decline to 8.4% from 8.7% prior, but above target to not shift projections for the rate decision. The UK will also publish retail sales figures at the end of the week, with forecasts seeing British consumers remaining resilient. GBPUSD bulls eye the $1.30 handle next while having to defend the support at $1.2685 or slide towards 1.2571.

Fed Chair Hoped to Provide Clarity During Testimony

Across the Atlantic, the Chair of the Federal Reserve, Jerome Powell, will give his bi-annual testimony before Congress, with potential questions about the future rate hike trajectory as the bond market moved to price in a higher risk of a recession following last Wednesday. EUR/USD looks poised to revisit $1.10, with resistance above there settled by 1.11. Bears must keep hold of the $1.08 support in case of a decline.

RBA and BOJ Minutes Ahead of Japan CPI

In keeping with the central bank theme, two major far-east central banks will publish the minutes of prior meetings. Traders are likely more interested in the RBA's minutes this time around after the surprise hike last time and to see whether the initial hawkish assessment is borne out in the bank's internal discussions.

For the BOJ, traders are likely more interested in whether inflation will finally pressure a change in the ultra-low policy. But the current outlook suggests that inflation pressure is easing in line with the reasoning given by BOJ Governor Kazuo Ueda in the past. May annual inflation in Japan is expected to drop to 3.2% from 3.5% prior.

Other events and earnings

Tuesday sees the release of US building permits and housing starts. Wednesday has Canadian retail sales. On Thursday, New Zealand publishes trade balance and credit card spending. Friday includes UK GfK consumer confidence.

Earnings expected in the coming week include FedEx, Sibanye-Stillwater, Winnebago, Accenture, Darden Restaurants and CarMax.