Week Ahead – A huge week for BoE, SNB to keep hiking, CBRT a wildcard

US

It will be a quiet Monday as Wall Street observes Juneteenth. A week filled with economic releases will probably see the most attention go towards Fed speak.  After the Fed’s hawkish skip, Wall Street wants to know if they can become convinced that we could see two more rate hikes. On Tuesday, Fed’s Bullard speaks at Barcelona School of Economics and Williams attends a NY Fed event.  On Wednesday, Chair Powell appears before the House Financial Services Panel, while Goolsbee speaks at the Global Food Forum.  On Thursday, Powell appears before the Senate Banking Panel. Mester and Barkin also make appearances on Thursday. Bullard and Mester also speak on Friday.  

This week contains a lot of housing data, with building permits on Tuesday, weekly MBA mortgage applications on Wednesday, and existing home sales on Thursday.  Housing data is expected to stabilize, but if we see strong demand for mortgages, that could unnerve the Fed. The end of the week contains the flash PMIs that should show manufacturing remains in contraction territory, while the service part of the economy softens.   

 Eurozone

The ECB made it very clear on Thursday that the tightening cycle is almost certainly not over and another 25 basis point hike is extremely likely. Markets had been pricing a small chance that the hike on Thursday will be the last – and interestingly, still are – which prompted questions and strong pushback from President Lagarde in the press conference. It would take “material change” for the committee to not raise rates, with a pause not even under consideration until now. The flash PMIs on Friday are unlikely to swing it one way or another but there isn’t much else of note next week.

UK 

A lot of people in the UK are becoming anxious about remortgaging and wondering why, when the BoE was among the first to start raising rates, so many more hikes are expected over the rest of the year and even into the next. The economy has been more resilient than anticipated but inflation is much higher than we’re seeing elsewhere and hasn’t made nearly as much progress. The risk of it becoming embedded meaning higher rates for longer and an eventual economic slump is rising by the week.

People will be hoping for some good inflation news on Tuesday but if recent months are anything to go by, we should probably expect the worst and hope for the best. Another bad report could pile pressure on the BoE a day later to hike by 50 basis points. It’s only 12% priced in at the moment but that could change if the CPI data is ugly once again. And with 125 basis points of hikes priced in between now and February, there’s seemingly a lot of work still to do. Retail sales and flash PMIs are also due on Friday.

Russia

With the CBR warning that rate hikes may be next on the agenda rather than cuts due to higher-than-desired inflation expectations, all eyes will be on Wednesday’s PPI data. Previously it was -12.7% year on year but the more recent monthly data showed an uptick of 2.4% which suggests near-term trends are not favorable.

South Africa

Stagflation is a very real risk, with rolling blackouts exacerbating those fears by weighing on economic activity and adding to price pressures. The SARB has continued to raise rates despite inflation now not being far from target and it may be forced to continue if pressures don’t abate soon. CPI data on Wednesday will tell us if any further progress has been made. The rand has made strong gains in recent weeks buoyed by higher rates and data confirming the country avoided recession in the first quarter. But enormous challenges remain.

Turkey

The CBRT will announce its latest interest rate decision next week and frankly, no one knows what’s going to happen. Since being re-elected on the promise of defending lower interest rates, President Erdogan has replaced his finance minister and central bank governor with more respectable candidates in a sign of returning to more conventional policy. Under Erdogan, nothing is guaranteed and next week we’ll find out just how true that is. 

Switzerland

The recent inflation report showed strong progress on getting inflation below 2% (2.2% in May) but that won’t be enough for the SNB to consider pausing on Thursday. In fact, markets are expecting the central bank to hike by 50 basis points, taking the policy rate to what Chairman Thomas Jordan suggested may be the neutral rate, of 2%. 

China

In terms of economic data release, it will be a quiet week with only the 1-year and 5-year loan prime rates to be decided on Tuesday. Last week, the Chinese central bank, PBoC, finally decided to tweak its cautious targeted monetary policy stances by implementing cuts on its two interest rate policy tools; 10 bps cut to the 7-day reverse repo rate (1.9% from 2.0% previously) and the 1-year medium-term lending facility (2.65% from 2.75%), its first cut since August 2022.

Hence more monetary easing measures are now expected to help cushion the current pace of sluggishness seen in internal domestic demand where the 1-year and 5-year loan prime rates are forecasted to be cut by 10 bps cut each, bringing them to 3.55% and 4.2%, respectively. These prime rates are used to price corporate/consumer loans and mortgages.

Also do take note of a possible announcement of a new stimulus package under consideration that has been drafted by multiple government agencies to support areas such as real estate and domestic demand.

India

No key data releases.

Australia

Two key data to digest. Firstly, the release of the minutes of the recent RBA monetary policy decision on Tuesday; the RBA unexpectedly raised the policy cash rate by 25 bps to 4.1% on 6 June, an 11-year high. As of 16 June, the ASX 30-day interbank cash rate futures (July 2023 contract) has priced in a 53% chance of another 25 bps hike in the next RBA meeting to bring the cash rate to 4.35%.

On Friday, we get flash Manufacturing and Services PMIs for June; the manufacturing component is expected to contract further to 47.7 from 48.4 in May. If it turns out as forecasted, it will be the 4th consecutive month of deterioration in the manufacturing sector. The services sector is expected to decelerate to 51.5 from 52.1 in May.

New Zealand

On Monday, the services PMI for May is expected to slow slightly to 49.1 from 49.8 in April. Balance of trade data for May will be released on Thursday where a deficit of -NZ$0.3 billion is being forecasted after a surplus of NZ$0.427 billion was posted in April. Exports are expected to have decreased to NZ$6.6 billion from NZ$6.8 billion (April) and imports are forecast to increase to NZ$6.9 billion from NZ$6.38 billion.

Japan

The latest BoJ monetary policy decision to maintain its ultra-easy monetary policy on Friday coupled with Governor Ueda’s forecast for the country’s inflation trajectory – he expects pressures to slow down in the second half of the current fiscal year – has toned down market players’ expectation of an extension to the band of its yield curve control program at the next meeting.

Next up, the focus will be on the latest inflationary trends in Japan. May’s nationwide inflation data will be released on Friday. The core inflation rate (excluding fresh food) is expected to dip slightly to 3.1% year-on-year from 3.4% in April. In contrast, the core-core inflation rate (excluding fresh food & energy) is forecast to surge to 4.2% year-on-year from 4.1% in April.

Flash manufacturing and services PMIs will be released on Friday as well. Manufacturing activities are expected to be almost unchanged at 50 in June from 50.6 in May while the service sector is seen growing at a faster pace of 56.1, up from 55.9 in May.

Singapore

One key data point to focus on; inflation for May is expected to dip slightly to 5.5% year-on-year from 5.7% in April. The core inflation rate is also forecasted to ease to 4.9% year-on-year from 5% in April.

Economic Calendar

Saturday, June 17

Economic Events

US Secretary of State Antony Blinken visits Beijing

German Chancellor Scholz speaks at a ceremony commemorating the 1953 East Berlin uprising

Sunday, June 18

Economic Events

EU foreign affairs chief Borrell meets Egyptian President Abdel-Fattah El-Sisi

Monday, June 19

Economic Data/Events

US markets observe Juneteenth holiday

Ukraine seeking to add Russia to money-laundering “black list” at meeting of Financial Action Task Force in Paris. Through June 23

European Central Bank’s Francois Villeroy de Galhau speaks at conference in Paris

Reserve Bank of Australia issues minutes of June’s policy meeting

German President Frank-Walter hosts Chinese Premier Li Qiang in Berlin

NATO Secretary General Stoltenberg and German Chancellor Scholz hold a news conference in Berlin

EU energy ministers meet in Brussels

Tuesday, June 20

Economic Data/Events

US housing starts

China loan prime rates

Hong Kong CPI

Japan industrial production

Mexico international reserves

FedEx Corp reports earnings

German Chancellor Scholz hosts Chinese Premier Li Qiang in Berlin

Fed’s Bullard speak at Barcelona School of Economics Summer Forum

Fed’s Williams speaks on leadership at Fed event

RBA’s Kent participates in panel at ISDA/AFMA Derivatives Forum in Sydney

RBA’s Michele Bullock at the AI Group in Newcastle

RBA releases minutes of June policy meeting

ECB’s  Rehn speaks on outlook for Finnish economy

ECB’s Gediminas Simkus speaks at the MNI event

Wednesday, June 21

Economic Data/Events

Fed Chair Powell delivers semi-annual congressional testimony before the House Financial Services Committee

Canada retail sales

Eurozone new car registrations

South Africa CPI

UK CPI

Indian PM Modi begins state visit to US. Will attend state dinner and address Congress during visit

Fed’s Goolsbee speaks at Wall Street Journal Global Food Forum in Chicago

Bank of Canada issues summary of June policy meeting

Bank of Japan issues minutes of April policy meeting

Thursday, June 22

Economic Data/Events

Fed Chair Powell delivers semi-annual testimony to Congress before the Senate Banking Committee

US Conference Board leading index, initial jobless claims, current account, existing home sales

Eurozone consumer confidence

Mexico rate decision

New Zealand trade

Norway rate decision

Switzerland rate decision

UK BOE rate decision

Fed’s Mester speaks at the bank’s annual policy summit

Central Bank of Turkey rate decision (first meeting for Gov Hafize Gaye Erkan, Turkey’s first female central bank governor)

French President Macron, German Chancellor Scholz, and Chinese Premier Li Qiang attend Summit for a New Global Financial Pact in Paris

EU European affairs ministers meet in Stockholm

Friday, June 23

Economic Data/Events

US June Prelim Manufacturing PMI, Services PMI

European Flash PMIs: Eurozone, Germany, France, and the UK

Japan CPI

Singapore CPI

Spain GDP

Fed’s Bullard speaks at the Central Bank of Ireland and International Journal of Central Banking Research Conference

ECB’s Vujcic delivers keynote lecture at 7th Annual Research Conference organized by central banks of Ukraine and Poland in Krakow

ECB’s Cos speaks at an event for financial journalists in Santander, Spain

Sovereign Rating Updates

Hungary (Fitch)

Poland (Fitch)

Ukraine (Fitch)

Poland (S&P)

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