Trading Week Ahead

Week of June 24

Last week's key events included central bank interest rate decisions that aligned with market forecasts, including RBA, BOE and Norgesbank holding, and SNB lowering its benchmark rate.

This week's calendar is lighter, allowing markets time to consider monetary policy implications. Attention will begin to turn towards upcoming US PCE data and the conclusion of the quarter's trading period.

Week in Review

Monetary policy decisions dominated the previous week.

The BOE interest rate decision came in a day after inflation returned to its 2% target. While headline and core inflation were marginally above forecasts, the bank maintained interest rates as widely expected by voting 7-2. Initially, markets saw this as a dovish signal, raising the chance of an August rate cut to even odds.

On less major central bank decisions, the RBA also kept rates on hold as anticipated while reiterating the need for further data to determine future policy moves; due to ongoing subdued inflation, the SNB proceeded with its anticipated second cut; and Norway's central bank opted against following the ECB's rate cut, citing strong wage growth maintaining inflationary pressures.

US retail sales disappointed analysts by reflecting the impact of high consumer prices on demand. This led to speculation that the Fed was delaying interest rate hikes for too long as the economy slowed enough to justify faster rate cuts. Falling yields contributed to rising US stock indices reaching new highs amid improving risk appetite.

Political tensions arose in France after snap elections were called, weighing on European markets and initially supporting German bonds. However, a subsequent treasury auction proceeded smoothly, providing some relief.

Meanwhile, Russian President Vladimir Putin began a tour of East Asia, signing a cooperation agreement with North Korea before continuing to Vietnam.

Biggest Market Movers

• Nasdaq and S&P reached new record highs last week during a relatively calm economic data period as investors welcomed the renewed focus on AI, but gains recoiled closer to the end of the session.
• WTI rose over 3% above $80 per barrel, marking a two-week gain due to concerns about energy demand and an overreaction to an earlier OPEC+ report.
• AUDUSD rose after the RBA decision as the central bank kept the possibility of a future rate increase open but remained below 0.67.
• The yen continued weakening after the BOJ stated its intention to purchase unlimited quantities of bonds indefinitely, ending nearly 1% lower against the dollar.
• Gold continued its ascend for the second consecutive week, supported by weaker retail sales and dovish expectations from central banks.

Top Events in the Week Ahead

The coming week holds relatively few significant economic announcements. Key attention will be paid to the United States PCE figures released on Friday.

PCE in Focus After Weaker CPI

The Fed closely monitors PCE data to decide monetary policy. Prices are expected to continue their gradual decline in line with previous months, reflecting the drop in the headline CPI reported earlier. Personal spending will also be in focus after weak retail sales last week to determine if softer consumer demand is a broader trend. An upward divergence from forecasts could pressure equities, opening the door to 19000 for Nasdaq.

France will update its CPI on Friday ahead of data for the Eurozone as a whole following the weekend. Given its status as the Eurozone's second-largest economy, the market will scrutinise France's figures to gauge inflation trends. After weeks of falling, EURUSD may find support above 1.06 should inflation figures accelerate more than expected, bringing 1.077 back in focus.

Canada is set to report that inflation remained above target but slowed further, suggesting that the BOC will not adjust rates until after the Fed. USDCAD may continue falling towards 1.36, especially if inflation surpises to the upside. Canada will also update its monthly GDP figures. Japan will also disclose Tokyo's CPIs. Forecasts point to Australia's rising inflation rate, indeed indicating that the RBA is not only far from easing its policy but could tighten rates soon. A divergence in expectations between the two figures may see AUDJPY accelerate to a 2007 high of 107.9.

Can the US Economy Keep Up the Pace?

Aside from PCE data, the US economy has a series of other economic indicators that will provide investors with some insight into its dynamics. Markets have been a little concerned that the economy may be showing signs of being impacted by the Fed's restrictive monetary policy, potentially slowing at a faster-than-anticipated rate.

Durable goods orders, which will be released on Thursday, may provide some insight and reassure investors if the figure is better than expected. The DXY may continue its gains for the 4th week in a row or descend towards 104.50.

The US and the UK will also provide a final review of their first-quarter GDP figures, and both are anticipated to affirm the initial numbers. ​After a 3-week decline, positive economic data in the UK, along with negative data in the US, could see Cable reverse some losses towards 1.2725; otherwise, it risks losing 1.2630, the 21-week SMA.