Week of June 19

After completing the latest cycle of major central bank rate decisions with the BOE's hike, investors have a relatively quiet week to digest the data with European inflation and unemployment figures just ahead of the US PCE price index.

Top Events in Review

The week had a slow start due to the US being out for a holiday and markets holding off concrete action in anticipation of Fed Chair Jerome Powell's comments before Congress. The head of the Federal Reserve essentially reiterated the contents of the last rate decision's policy statement, affirming that there were likely two more rate hikes in store, but the pace of reaching them might be slower. 

Over the weekend, Chinese officials announced a series of measures to support the domestic economy and the housing market, but investors had been anticipating more aggressive action, reacting to what was seen as a disappointment. The minutes from two meetings ago were released, expecting inflation to come down through the summer and doubling down on easing. 

UK Inflation came in well above expectations, leading the BOE to hike by an unexpected 50 basis points in a 7-2 vote. However, the pound weakened in the aftermath, with the yield curve descending as investors priced in a higher chance of a recession. Cable ended its 3-week streak, last seen flirting with $1.27.

Hurricane season started early this year, with the NHC announcing that tropical storm Bret reached Cat 1 strength by the end of the week. 

In geopolitics, relations between the US and China appeared to be improving with US Secretary of State Antony Blinken's visit to the country to meet President Xi Jinping but suffered a setback after US President Biden characterised the President of China as a dictator. Ukraine paused its counteroffensive, which has shown slower progress than anticipated.

Biggest Market Movers

USDCAD hit a 9-month low on a continuation of the move following BOC's surprise rate hike.

WTI fell below $70/bbl in the wake of Fed Chair Powell's congressional testimony that more rate hikes were incoming, opening up $65/bbl unless we see an attempt towards $72.50/bbl.

Gold prices trended lower throughout the week as the dollar gained on rising yields.

USDJPY continued to probe multi-month highs following the release of minutes from the April BOJ meeting affirming commitment to ultra-low interest rates. The pair has no major resistance until 145.00, with current support near 141.90.

Top Events in the Week Ahead

JP Could Shake Up Markets Ahead of PCE

Two events from the US could be the major events next week: On Wednesday, Fed Chair Jerome Powell gives a speech, which always carries the potential for a comment to shake up markets. Investors are starting to be a little more shaky about the chance of another rate hike at the next Fed meeting, following remarks by Powell before Congress last week. On Friday is the release of the Fed's preferred measure for prices, the Core PCE Price Index, which is expected to decelerate on both the monthly and annual rate, possibly giving more ammunition for the minority expecting another rate hold from the Fed. Traders might focus on gold price action following the recent breakdown to $1910/oz, eyeing $1930/oz on the one side and $1890/oz on the other in the short term.

Busy European Calendar

The Eurozone is slated to release a trove of data in the lead-up to Friday's inflation and unemployment reports. German Ifo Business Climate is expected to remain essentially unchanged, with GfK consumer confidence having a marginal improvement despite staying in contraction. German inflation is expected to come down but remains higher than French inflation. Both figures will be released ahead of Eurozone Flash CPI, expected at 5.6% compared to 6.1% prior, with the unemployment rate steady at 6.5%. EUR/USD saw a rejection at $1.10 and slid under $1.09 - now a resistance, exposing $1.08 and perhaps lower levels. 

Canadian Data Might Justify More BOC Action

Canada will report inflation still doubling the target at 4.2%, but down from the 4.4% prior. But the preferred measure of the BOC, the trimmed mean annual rate, is expected to be only marginally lower at 4.1% compared to 4.2% prior. Canada's monthly GDP is expected to accelerate to 0.2% from flat previously. Loonie is facing a sideways market ahead, with support and resistance at $1.3140 and $1.3275.

Other Events and Earnings

Monday has Dallas Fed Manufacturing Index. Tuesday sees US Durable Goods Orders and Conference Board Consumer Confidence. The SNB will publish its quarterly bulletin on Wednesday. For Thursday, Japanese consumer confidence and UK mortgage approvals are scheduled. On Friday, Japan will publish its unemployment rate and industrial production figures.

Earnings expected in the coming week include Carnival, Walgreens Boots Alliance, TD Synexx, Sibanye Stillwater, Micron, General Mills, Nike, Paychex, McCormick and Constellation Brands.