UPCOMING EVENTS:
Monday: US June holiday.
Tuesday: PBOC LPR.
Wednesday: UK CPI, Fed Chair Powell Testimony.
Thursday: SNB Policy Decision, BoE Policy Decision, US Jobless Claims.
Friday: US S&P Global PMIs.
Tuesday: The PBOC is expected to cut 1-year and 5-year LMP rates by 10 basis points after cutting 7-day reverse repos, the standing credit facility and the 1-year MLF rate. The measures were taken due to the very weak performance of the Chinese economy, which has prompted officials to seek more support for growth.
Wednesday: UK CPI Y/Y expected to print at 8.5% vs. 8.7% earlier, while Core CPI Y/Y is expected at 6.7% vs. 6.8% previously. The news comes just a day before the BoE’s rate decision, but with the BoE already widely expected to hike by 25 basis points, the news is unlikely to change expectations for the session unless we see some very big surprises.
Fed Chairman Powell will testify in Congress on the state of US monetary policy. With it coming just a week after his FOMC press conference and with no headline economic data in the meantime, it’s unlikely we’ll hear anything else.
Thursday: The SNB is expected to raise by 25 basis points, bringing their interest rate to 1.75%. The decline of 50 basis points is justified by softer CPI data, where the main CPI Y/Y reached 2.2% and the Core CPI Y/Y printed at 1.9%. The SNB is very close to its 0-2% target band, but with Governor Jordan’s recent hawkish comments after the CPI data about inflation being more persistent than thought and second and third round effects being seen, the market expects 25 basis points . increase at this meeting, which may be the last.
The BoE is widely expected to raise by 25 basis points, taking Bank Rate to 4.75%. Recent data on inflation and employment has been really hot as wage growth has been too high to return to their 2% target. Dhingra and Tenreyro are expected to vote for no change, so it would be taken as a hawkish surprise if either of them voted for the increase. The market expects the BoE to raise the terminal rate to 5.25% at this point.
US Jobless Claims have been on the upswing of late, beating expectations by a significant margin over the past two weeks. However, continuing claims, a measure of how difficult it is for people to find work after being unemployed, remained broadly stable. There may be some softening in the labor market, but not yet enough to trigger a recession. Anyway, initial claims are expected to be 256,000 vs. 262,000 previous, while continuing claims are seen at 1,766,000 vs. 1775,000 earlier.
Friday: S&P Global US PMIs may be the most important data point for this week. The manufacturing PMI is expected to print at 48.3 versus 48.4 earlier, while the services PMI is seen at 54.0 versus 54.9 earlier.
I wish you a successful week!