RBA rate decision ahead
BoJo faces no-confidence vote
The British Pound has been underperforming in recent sessions—falling by 0.73% versus the US Dollar and claiming the title of the second-worst performer of the G10 major currencies bar the Japanese Yen. Despite the news that British Prime Minister Boris Johnson will face a vote of no confidence today, the Pound’s been relatively resilient this morning. Instead, markets are focused on the Bank of England and forecasted rate hikes, with seven rate increases expected in the next 12 months. In terms of economic data, UK mortgage approval figures released last week came in lower than expected for April at 65.97K, following on from the March reading of 69.53K. Meanwhile, the Bank of England's Consumer Credit reading, which measures borrowing by the British public, came in higher than forecast last Tuesday as the UK continues to feel the effects of the cost-of-living crisis. In the week ahead, UK BRC Retail Sales and services data will be released tomorrow, while Construction numbers will follow later in the week. Looking slightly further ahead, markets will be getting ready for the next Bank of England Monetary Policy Committee interest rate announcement on the 16th of June.
Betting on hikes
The war in Ukraine is beginning to influence the Euro less, and markets are instead watching the European Central Bank, with expectations to see policymakers take on a more aggressive tack when it comes to interest rates. The upcoming July and September meetings will be of particular interest to investors with some forecasting 50 basis point rate hikes. Last week saw the EU implement a ban on seaborne Russian oil imports, which added to the existing fuel supply crunch and encouraged oil prices to edge higher. The Eurozone's flash Core Inflation Rate reading increased beyond the expected 3.5% to come in at 3.8% on the year in April, while the non-core measure jumped to 8.1% from 7.4% previously. In the week ahead, the Eurozone's latest GDP growth rate figures will print, but the ECB's interest rate announcement will be the headline event for the week and will happen on Thursday. It's followed by a press conference where markets will be watching closely for any clues on future monetary policy decisions.
Inflation on the horizon
The US Dollar has been trending slightly lower as riskier assets gain in popularity. Last week, the US saw Consumer Confidence note a decline, but still produce a better-than-expected reading for May, and manufacturing figures printed to show expansion in the sector. Meanwhile, Friday’s Non-Farm Payrolls came in above forecasts, highlighting 390K people entered the workforce in May. Meanwhile, the US Unemployment Rate failed to edge lower as forecast and instead remained at 3.6% in May. This week brings the release of trade figures and Consumer Credit Change, while Initial Jobless Claims data being released on Thursday will indicate to markets what patterns are emerging in the labour market. On-the-year Inflation and Core Inflation data will hit markets on Friday, and the preliminary Michigan Consumer Sentiment Index is expected to show an improved reading of 61.0 following a print of 58.4 previously. Markets will be watching these key ecostats ahead of the Federal Reserve's interest rate statement and press conference next week.
AUD and NZD
RBA rate decision ahead
Sterling has dropped 1.90% against the Aussie Dollar in the past month but is trading 0.40% higher today ahead of the Reserve Bank of Australia rate decision in the early hours of Tuesday morning. Economists are predicting a 50 basis-point hike on the high end with the median estimate for a 0.25% hike. Kiwi Dollar strength has followed the Aussie over the last month with GBP/NZD falling 1.30%, on the day Sterling has gained over 0.30%. There is little data out for New Zealand this week with the GBP/NZD pair likely subject to swings in the commodity market and any material political fallout from Boris Johnson’s confidence vote. In Australia's calendar this week, the latest Building Permits data will reach the market, as well as the headline RBA interest rate decision and chart pack release. Aussie Consumer Inflation Expectations for the next 12 months will close the week. Meanwhile, New Zealand's Retail Card Spending figures will interrupt an otherwise quiet week for economic data in the country.
Hawkish Bank of Canada
The Canadian Dollar has strengthened against Sterling on the month, with the GBP/CAD currency pair down 1.70%. The Loonie has been supported by a hawkish Bank of Canada which hiked interest rates by 50 basis points just last week, taking the benchmark rate to 1.5%. Employment figures and the Ivey PMI, a key indicator of purchasing activity in Canada, are expected to print in Canada this week. Bank of Canada Governors, Tiff Macklem and Carolyn Rogers, are set to speak in the middle of the week.