Market Outlook for the Week of 26 – 30 June

<p>During the
previous week, the SNB raised interest rates by 25bps and indicated that
further tightening is anticipated in the future, potentially with another 25bps
increase in September. The SNB emphasized that inflation remains a concern, and
there are expectations that it could run hot again in the coming winter.</p><p>In a
surprising move, the BoE raised the rate by 50bps to combat elevated levels of
inflation. While future rate hikes are possible, it is unlikely that they will
be as substantial. A 25bps increase appears to be more likely. The market is
anticipating another rate hike at the upcoming BoE meeting in August.
This week brings forth a series of significant events across various economies:</p><p>On Tuesday,
attention will be on Canada as the CPI data is released, providing insights
into inflation trends. In the United States, key indicators to watch for include
core durable goods orders m/m, durable goods orders m/m, CB consumer
confidence, new home sales, and the Richmond manufacturing index.</p><p>Wednesday
holds important events for different countries. Australia will announce the CPI
data y/y and Switzerland will release the SNB Quarterly Bulletin, providing
updates on the country's economic outlook. Additionally, notable figures such
as ECB President Christine Lagarde, BoE Governor Andrew Bailey, BoJ Governor
Kazuo Ueda, and Fed Chair Jerome Powell will participate in a panel discussion
titled "Policy panel" at the ECB Forum on Central Banking in Sintra.</p><p>Moving on
to Thursday, the focus shifts to the eurozone, with the release of the German
Preliminary CPI m/m and Spanish Flash CPI y/y. In the U.S., the final GDP q/q
data and unemployment change figures will be released, along with the pending
home sales m/m report.</p><p>Finally, on
Friday, Japan will release the Tokyo Core CPI y/y and the eurozone will unveil
the Flash CPI figures. In the United States, attention will be on housing
starts y/y, the Core Personal Consumption Expenditures (PCE) Price Index m/m,
Revised University of Michigan (UoM) Consumer Sentiment, and Revised UoM
Inflation Expectations. Switzerland will announce the KOF Economic Barometer, while
Canada will release the monthly GDP figures. Another aspect to watch for this
week is the month-end rebalancing.
This week, the Canadian CPI data is expected to indicate a rise in headline
inflation for the month of May, while the y/y figure is projected to decrease
to 3.4%. Following stronger-than-expected inflation prints last month, the BoC
resumed its tightening cycle. Analysts at Citi have highlighted that the
crucial aspect of the May inflation data will be the 3-month trend observed in
core inflation measures.</p><p>In the
United States, durable goods orders are anticipated to fall below expectations
this week. The consensus for durable goods orders m/m suggests a decline from
1.1% to -0.8%, while for core durable goods orders m/m, a slight increase from
-0.3% to -0.2% is predicted. Notably, the ISM Manufacturing Index has recorded
seven consecutive months of contraction, and manufacturing production saw only
a marginal increase of 0.1% in the previous month. Analysts from Wells Fargo
pointed out that elevated financial costs and economic uncertainty have
contributed to a decline in demand for new capital expenditures. </p><p>CB Consumer
confidence is likely to rise modestly from 102.3 to 104.0. According to
analysts from Citi, there's a possibility that CB consumer confidence will
decrease later in the year if unemployment rises because compared to the UoM
consumer confidence, the Conference Board measure is more sensitive to
employment conditions.</p><p>New home
sales in the U.S. have started to pick up a bit. Existing home sales printed
slightly above expectations last month and housing starts surprised by
registering one of the biggest gains in the last 7 years with 21.7% growth. For
this week's data the consensus for new home sales is to drop from 683K to 676K,
but overall the housing market seems to have stabilized lately.</p><p>The
inflation data for Australia is eagerly awaited this week with the consensus
being a decline from the surprising rise in April. If data are in line with
expectations the RBA could pause hikes at the next meeting in July.</p><p>The Tokyo
Core CPI data will be important to watch as it can play a key role in the BoJ's
monetary policy decision. The consensus is for a rise from 3.2% to 3.4% in the
y/y data. This upside trend is likely to continue in July as well, with
commodity and services prices rising. Lately there has been a gradual economic
recovery in Japan reflected in stronger than expected PMI data and this is
likely to continue.</p><p>
The CPI data for the eurozone should be closely monitored as it can influence
the path of the ECB monetary policy in the coming months. As a reminder the ECB
hiked the Deposit Rate by 25bps at the last meeting taking it to 3.5% and
commenting that inflation remains much too high. The Bank also raised their forecasts
for core CPI putting another hike on the table for the next meeting in July.
The question on everyone's mind now is if an additional hike in September is
also possible.</p><p>In May the
CPI printed below expectations for the first time in a while. For this week's
data the consensus is for the headline inflation to cool down and for the core
inflation to rise to 5.5%. If inflation surprises to the downside the ECB could
take into consideration a pause in its tightening cycle. If data runs hot then
further tightening might be appropriate. </p><p>In the U.S.
the consensus for Core PCE Price Index m/m is to remain unchanged at 0.4%.
Personal Income m/m is likely to rise by 0.3% and the Personal Spending m/m is
also expected to see a growth of 0.2%, driven by services spending in
particular. According to Wells Fargo, consumer purchasing power has recovered
and while credit standards are tightening, strength in income for the past 10
consecutive months have helped offset that.</p><p>This article was written by Gina Constantin.</p>

This article was written by FL Contributors at www.forexlive.com.