Important Week Ahead On Exchange Rate Market;
3 Rate Decisions, 4 Inflation Prints And The Trump-Kim Summit
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While the G7 meeting has dominated headlines over the weekend, the tepid moves in various markets to start the week show it has had little effect in the near term. For all the disarray and disagreements, the market has seen nothing new to factor in. Focus has already shifted to the US-North Korea summit in Singapore, where any progress will be seen as a major boost to world peace and progress and a giant feather in President Trump’s cap. This should boost risk markets such as equities, and help the US dollar, but of course, things could go the other way. With two volatile personalities and not much common ground, there is potential for relations to get worse rather than better. Markets are therefore in the middle of a reaction range with the potential for volatility in both directions.
Away from geopolitics, a packed week in the economic calendar sees three rate decisions, four inflation prints, and two jobs reports. Here’s a run-down of the scheduled releases.
Monday June 11
Monday is likely to be dominated by the fallout from the G7 meeting. The only news today is UK Manufacturing and Production and Trade Balance. No Fed speakers today as the pre-FOMC purdah continues. Australian markets are closed for the Queen’s Birthday (but curiously the UK is not).
Tuesday Jun 12
Tuesday will be dominated by the possibly historic Trump-Kim summit. In the UK, the Brexit bill goes back to the House of Commons, and we have the key unemployment and average earnings figures. These will need to be good to keep up GBP momentum. Also out is US inflation, although this print is too close to FOMC to make any different to the rate decision.
Wednesday June 13
Wednesday is FOMC Rate Set day, and a rise from 1.75% to 2.00% is widely expected. No change is expected to the ‘dot-plot’, the summary of all voting members future intentions. A speech by Chair Powell is scheduled and his language will be watched closely. No let up in matters affecting GBP, with the all-important inflation figure due for release. Key is the ex-food and energy figure estimate at 2.1%.
Thursday June 14
The fourth print to affect GBP this week is Retail Sales, although this will have less effect as it is only an inflation proxy, and the real thing was the day before. Traders now have all the information they are going to get to predict whether the BoE will raise rates next week.
The main event of the day is the Euro rate decision, or more correctly the 13:30 press conference, where traders will be looking for ECB Pres Draghi to confirm Weidmann’s bullish remarks last week. German CPI earlier in the day will also have an effect on EUR although this rarely deviates from the estimate. The US Retail Sales print is less important because the same reason given above about the equivalent UK print.
Friday June 15
The third rate decision of the week comes from Japan, although this is less of an event—unless of course BoJ Gov Kuroda says something unexpected. In practice in a week like this, markets will still be digested the ECB and Feb positions. ECB Cœuré speaks at 08:45. Also today, the USTR to publish final list of $50bn Chinese imports subject to 25% tariff. This many affect certain sectors in US stocks.