RBA rate hikes expected

GBP

Manufacturing slowdown

The Pound has fallen 0.80% against a range of other currency majors over the last week as Sterling's weakness continues. The British currency was down 7.3% against the US Dollar in this year's second quarter. GDP growth figures printed in line with forecasts last week. At the same time, Friday's UK Manufacturing Purchasing Managers' Index showed that output growth slowed as new orders fell for the first time since January 2021. The consumer goods sector was particularly impacted as the global cost-of-living crisis continues to weigh on the buying power of UK households. Speaking at a central banking forum in Portugal last week, Bank of England Governor Andrew Bailey angled that price pressures are the result of a series of large supply shocks, forcing the world to bake scarcity of goods into future expectations. Bailey is due to speak again tomorrow. There’s a range of other economic events and releases due in the UK this week, including the BoE's Financial Stability Report, various speeches from Monetary Policy Committee members, and figures around services, construction, and housing.

EUR

Calls for flexibility if data worsens

The Euro to US Dollar exchange rate has fallen over 1% in the past seven days as the US Dollar staged a rebound. Last week, European Central Bank Governing council member Gediminas Simkus joined fellow ECB colleague Martins Kazaks in arguing that a 25 basis point interest rate hike isn't set in stone for the next meeting. It was argued that the central bank must allow flexibility if inflation data worsens. Policymakers are set to meet later this month. In addition to any shifts in monetary policy, more detail on the central bank's new anti-fragmentation tool is highly anticipated. This week, the Eurozone's economic calendar is light on high-tier data. However, the European Commission's latest EU Economic Forecasts will become available, and ECB President Christine Lagarde will speak on Friday. Markets will closely watch her comments as we approach the next EU monetary policy meeting.

USD

Outlook at near-decade lows

The Buck is back in favour this week, with the US Dollar Index moving back above the $105 level. Last week's CB Consumer Confidence index release fell short of forecasts to read 98.7 in June, following a previous decline to 103.2 in May. The release highlighted that consumer sentiment in the US is being impacted by increasing inflation concerns and future expectations falling nearer to the lowest levels in nearly a decade. On Thursday, the US Core Personal Consumption Expenditure Price Index—the Federal Reserve's preferred measure of inflation—came in slightly under the 4.8% forecast at 4.7%. US markets are closed today in observance of Independence Day. However, it's still busy for US economic data releases in the days ahead. Meeting minutes from the latest Federal Open Market Committee meeting will be posted on Wednesday, with a range of high-tier labour data filling out the latter half of the week. With the upcoming FOMC statement and federal funds rate decision due towards the end of the month, all eyes will be on any economic data that could influence policymakers.

AUD and NZD

RBA rate hikes expected

The Pound to Australian Dollar exchange rate has traded flat over the course of the last week, remaining between the 1.76 and 1.78 levels. Meanwhile, Sterling is just over 15 basis points higher against the New Zealand Dollar since the start of trading last week, with the pair up 0.75% over the month. Australia printed a preliminary Retail Sales figure for May last week, beating forecasts to come in at 0.9%. This week the Reserve Bank of Australia will meet, with Governor Philip Lowe recently indicating the central bankers will be debating between a 25 or 50 basis point cash rate rise. Markets are now expecting the higher rate rise of the two. In New Zealand, the ANZ Business Confidence Survey read -62.6 last week, showing deteriorating sentiment from the country's businesses. This week, the Reserve Bank of New Zealand will release its annual Statement of Intent, including a budget for the next year and the central bank's objectives for the next three. This comes ahead of New Zealand's own upcoming cash rate decision, which will happen next week.

CAD
GDP growth slowing

The Pound to Canadian Dollar exchange rate has fallen over 1.30% since the last Monday. In that time, the Canadian GDP data was released to show growth in April. The reading met expectations, rising by 0.3%, following a 0.7% increase in March. Mining, quarrying, and oil and gas extraction contributed the most to the country's growth, with real estate contracting and construction remaining unchanged. At the same time, the preliminary GDP figure for May showed contraction, at -0.2%. Canada's Prime Minister Justin Trudeau attended last week's G7 summit, saying that his country was exploring 'medium-term' energy support for Europe. He expressed that this was a 'goal of accelerating the transition not just off Russian oil and gas, but off of our global dependence on fossil fuels because of the impacts of climate change'. Later this week, the Ivey PMI will be published, and labour data will be released for June ahead of the Bank of Canada's upcoming interest rate decision.