Week Ahead of June 20

Week of June 20

After a series of rate hikes around the globe, markets won’t have long to reorient to the new situation before Fed Chair Powell testifies to congress mid-week.

The week in review

• Central bank action dominated the week. After dismal inflation numbers, the market readjusted to a stronger hike from the Fed in the hours ahead of the announcement. The SP500 is down nearly 7%, finding intraday at 3640. 3840 is resistance, but the next bear could carry the price down to 3400. 
• The SNB hiked out of the blue, expressing concern that cost increases in Switzerland have gone beyond the areas affected by the pandemic and war in Ukraine. USD/CHF plummeted 4% after pinning a top at CHF1.0050. There is support near 0.9540, and relief resistance at around 0.9740.
• The BOE also hiked, maintaining its established tightening trajectory. Cable initially dipped on the dovish messaging but managed to recover amid dollar weakness, and eyes $1.2500 in the week ahead, but $1.2400 comes first. Inversely, $1.2235 and $1.2150 makes support above $1.2000.
• Markets initially rallied with news of an emergency ECB meeting, set to address the "fragmentation" issue, but it turned out to be something of a disappointment as it only resulted in a call for policy proposals.

Top movers for the week ahead

Powell’s Humphrey-Hawkins testimony 

Fed Chair Powell heads to Capitol Hill to provide a standard semi-annual report to Congress. So soon after the last meeting, there isn’t much news expected from the testimony, but the Q&A session could provide some headlines for the markets. On Wednesday he’ll testify in the Senate and Thursday in the House.

Readjusting to the new norm

The data calendar is relatively light, and the US will start the week a day late after a new holiday on Monday. Therefore, the general theme will be reactionary to the latest moves by major central banks. 

The SNB dropping the comment that the currency is overvalued could see one of the major safe havens gain ground as the ECB waits to get the right policy tools ahead of its rate hike less than a month from now. EUR/CHF could see parity again unless CHF1.027 breaks.

Second-tier rate decisions

The Norges Bank meets on Thursday where a hike is expected, though there isn't a consensus on how much tightening to expect. Czechia is expected to hike by at least 75bps. Economists also aren't sure whether Banxico will hike by 50 or 75bps, given the recent move by the Fed. USD/MXN could fail to cross above 20, heading to 19.40 and below unless we close above 20.50. Other central bank meetings include Indonesia and The Philippines.

Flash PMI data could set the tone 

Thursday is also Flash PMI data, with figures from Australia, France, Germany, the UK, and the US. Markets are likely looking to see how much impact inflation is having on businesses and if there is any improvement following central bank moves.

Other data and events

With all the focus on inflation, the German PPI on Monday could affect the markets a bit. Tuesday includes Canada Retail Sales for April. Overnight, New Zealand reports its trade balance, before Wednesday with CPI from both the UK and Canada. Thursday sees the start of a two-day European Council meeting. Friday has Japanese CPI, UK retail sales, and Michigan consumer sentiment.