UPCOMING EVENTS:
Monday: US Juneteenth Holiday.
Tuesday: PBOC LPR.
Wednesday: UK CPI, Fed Chair Powell’s Testimony.
Thursday: SNB Policy Decision, BoE Policy
Decision, US Jobless Claims.
Friday: US S&P Global PMIs.
Tuesday:
The PBOC is expected to cut the 1-year and 5-year LMP rates by 10 bps following
the cuts in the 7-day reverse repo, the Standing Lending Facility and 1-year
MLF rates. These actions were taken due to the very weak performance of the
Chinese economy that prompted officials to seek more support for growth.
PBOC
Wednesday:
The UK CPI Y/Y is expected to print at 8.5% vs. 8.7% prior, while the Core CPI
Y/Y is expected at 6.7% vs. 6.8% prior. This report comes just a day before the
BoE rate decision but given that it’s already widely expected that the BoE will
hike by 25 bps, it’s unlikely to see this report changing the expectations for
this meeting unless we see very big surprises.
Fed Chair Powell will testify to Congress
on the state of US monetary policy. Given that it comes just a week after his
FOMC Press Conference and that we haven’t got any top tier economic data in the
meantime, it’s unlikely that we will hear anything different.
Fed Chair Powell
Thursday:
The SNB is expected to hike by 25 bps bringing their interest rate to 1.75%.
The step down from 50 bps is justified by the softer CPI data where the
Headline CPI Y/Y came at 2.2% and the Core CPI Y/Y printed at 1.9%. The SNB is
very close to its 0-2% target band but given the recent Governor’s Jordan
hawkish comments after the CPI data about inflation being more persistent than
thought and that both second and third round effects are being seen, the market
expects a 25 bps increase at this meeting that may even be the last one.
SNB
The BoE is widely expected to hike by 25
bps bringing the bank rate to 4.75%. The recent inflation and employment data
have been really hot, with wage growth being too high for a return to their 2%
target. Dhingra and Tenreyro are expected to vote for no change, so if any of
them votes for a hike, it would be taken as a hawkish surprise. The market expects
the BoE to take the terminal rate to 5.25% at the moment.
BoE
The US Jobless Claims have been on the
rise lately missing expectations by a notable margin on two straight weeks.
Continuing Claims though, which are an indicator of how hard it is for people
to find jobs after being unemployed, remained basically steady. There may be
some softening in the labour market but not yet enough to call for a recession.
Anyway, initial claims are expected at 256K vs. 262K prior, while continuing
claims are seen at 1766K vs. 1775K prior.
US Continuing Claims
Friday:
The S&P Global US PMIs might be the most important data point for this
week. The Manufacturing PMI is expected to print at 48.3 vs. 48.4 prior, while
the Services PMI is seen at 54.0 vs. 54.9 prior.
S&P Global US Services PMI
Wish you a profitable week!