It was a slow start to the trading week before market players started placing their bets on the key catalysts, especially the US CPI report and three central bank decisions.
High-profile US events turned out to be a bit surprising, including US CPI missing estimates while the FOMC remained very hawkish despite hitting the pause button with its rate hikes.
Although the dollar managed to post some gains when policymakers dropped hints of tightening, the greenback is lagging behind most peers, along with the low-yielding yen.
US dollar pairs
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The US currency was off to a very strong start, as the dollar bulls were hoping the inflation report would come out strong and increase the odds of further Fed tightening.
However, the actual numbers were lower than the estimates, leading many to suspect that the US central bank may continue its tightening cycle.
To the surprise of some, the FOMC voted unanimously to keep interest rates on hold at 5.00-5.25% for the time being while still noting that two rate hikes are on the horizon.
Dollar sentiment turned quickly on Thursday with another weekly jobless claims report pointing to weak hiring, overshadowing the generally positive retail sales update in the US.
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The Federal Open Market Committee kept the federal funds rate range at 5% to 5.25%. by a unanimous vote, but more tightening (possibly two more increases) is needed; No member indicated a cut in 2023
The preliminary US consumer confidence reading for June rose to 63.9 vs. 59.2 in May – University of Michigan; One-year inflation expectations fell from 4.2% to 3.3%
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US consumer price index For May: 4.0% YoY (4.3% YoY expected) vs. 4.9% YoY; Core CPI fell from 5.5% yoy to 5.3% yoy
Producer prices in the United States For May: -0.3% m/m (0.1% m/m expected; 0.2% m/m previously); Core PPI came in at 0.2% m/m (0.1% m/m expected; 0.2% m/m previously)
euro pairs
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The shared currency rose against most of its forex peers since euro traders were seeking another rate hike from the European Central Bank.
Mid-level economic data such as the ZEW Economic Sentiment Surveys and the Eurozone Industrial Production report also underpinned the central bank’s hawkish outlook.
Come statement day, not only did ECB President Lagarde deliver a 0.25% rate hike, but she also hinted that another tightening move could be imminent for July.
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industrial production in the eurozone It rebounded 1.0% month over month in April after falling 2.6% in March
German ZEW Economic Sentiment Index Up from -10.7 to -8.5 in June vs. -13.4 expected, Eurozone reading fell from -9.4 to -10.0 vs. -12.1 estimated
The European Central Bank raised interest rates by 0.25% as expected and confirmed that the reinvestment of bond purchases through the asset purchase program will end next month
European Central Bank President Lagarde He hinted at the possibility of another rate hike in July, as inflation estimates have been raised and the ECB has “more ground to cover”.
Sterling pairs
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Inflation expectations and BoE hawkish hopes got a fresh boost from stronger-than-expected wages data and comments from Governor Bailey who emphasized that policy makers are worried about a wage price spiral.
The upbeat jobs data, along with the slight improvement in monthly GDP, also helped keep the pound stable for most of the week.
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Number of claimants in the UK Decreased by 13.6K instead of an estimated rise in the unemployment rate of 21.4K in May, as the previous reading was revised to show a smaller increase of 23.4K in the initially reported unemployment rate of 46.7K.
UK average income index It accelerated from 6.1% to 6.5% in the three-month period ending in April, reflecting stronger inflationary pressures.
Bank of England Governor Bailey In a speech to the House of Lords Economic Affairs Committee, he said:We have a very tight job market“and that slowing inflation is”It takes much longer than expected.“
UK GDP for the month of April Returns to positive territory with growth of 0.2% m/m (from -0.3% in March) thanks to higher consumer spending and fewer labor strikes
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industrial production in the United Kingdom Decreased 0.3% m/m in April vs -0.1% expected, and -0.7% in March
Swiss Franc pairs
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The franc had mixed movement during the week, posting big gains to its lower-yielding rivals such as the yen and the dollar, but giving up some of its gains to commodity currencies and their European counterparts.
Two data points on the Swiss economy, the PPI and Import Prices report, reflected weaker inflationary pressures, but the overall positive effect on risk sentiment is likely to be greater on broad-based franc moves this week.
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Switzerland has product and import prices -0.3% vs +0.2% MoM
The State Secretariat for Economic Affairs said Consumer prices in Switzerland It will rise 2.3% this year, down from a rate of 2.8% in 2022
AUD pairs
The Australian dollar put up a good fight to hold on to its gains from the previous week, despite mostly downbeat data from its major trading partner, China.
Strong consumer sentiment, jobs data and inflation expectations are likely to keep the Aussie bulls optimistic about another RBA rally at their next meeting. It is possible that the broad positive risk sentiment has helped the currency to rise significantly against the Yen and the Dollar.
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Australian Westpac Consumer Confidence Index It rose 0.2% in June, after declining 7.9% earlier
People’s Bank of China Cut the 7-day reverse repo rate from 2.0% to 1.9% and cut the internal reference price by 200 pips
Melbourne Institute: Inflation Expectations Unchanged at 5.2% in June, wages are expected to grow 1.6% over the next 12 months.
Unemployment rate in Australia Decreased from 3.7% to 3.6%, Net Employment +75.9K (vs. 18.6K expected, -4.0K prior) due to increased vacancies and higher demand for skilled labor
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NAB Australian Business Confidence Index It fell from 0 to -4 in May to reflect worsening conditions
I’m Chineseindustrial product It slowed from 5.6% yoy in April to 3.5% yoy in May while retail Up 12.7% YoY in May, lower than expected 13.6% and April growth of 18.4%
CAD pairs
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The Canadian dollar is also on track to post a mixed performance this week, posting significant gains against the greenback and yen while remaining in the red versus other commodity currencies.
There wasn’t much on the economic data front for Canada, which is probably why the Canadian dollar either took cues from crude oil price action or acted mostly as a counter currency.
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Canadian Manufacturing Sales for April: +0.3% mom 72 billion Canadian dollars; -1.6% annually
Canada’s international securities transactions for the month of April: C$13.5 billion compared to 19.72 billion Canadian dollars previously
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API Special Crude Oil Inventories In the US, it rose by 1.024 million barrels for the week of June 9, instead of declining as expected
Crude oil stocks in environmental impact assessment It jumped by 7.9 million barrels instead of declining by 510,000 barrels as expected in the week ending June 9.
May Canadian housing starts: -23% m/m to 202.4 thousand units;
Canadian Wholesale Sales in April: -1.4% m/m 80.9 billion Canadian dollars
NZD Pairs
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Even middling, downbeat data from New Zealand was often not enough to prevent the New Zealand dollar from outperforming the majority of its forex rivals, with the exception of the Australian dollar and the euro.
Indicators of business performance and consumer spending pointed to weaker activity, confirming an already downbeat quarterly GDP that officially put the economy into recession in the first quarter.
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New Zealand has retail e-card sales A decline of 1.7% m/m in May vs. an estimated rise of 0.3%.
NZIER lowered New Zealand’s GDP forecast to an expansion of 0.6% through March 2024, as estimates of household spending were revised downward
New Zealand visitor arrival It fell 16.9% month over month in April, while the number of long-term and permanent migrants fell to its lowest level since October last year.
New Zealand annual current account The deficit shrinks unexpectedly from 9.0% to 8.5% of GDP in the first quarter of 2023.
New Zealand is now technically in a recession With GDP printing -0.1% qoq in the first quarter of 2023 after declining by 0.7% in the fourth quarter of 2022
Japanese yen pairs
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The Japanese yen is poised to end the week behind its forex peers, thanks to a combination of unimpressive economic data and a dovish monetary policy statement from the Bank of Japan, which once again carries an ultra-low interest rate of -0.1%.
Overall risk sentiment is likely to be a factor, as traders continue to see increasing odds that the global interest rate hike cycle may be coming to an end.
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Japanese BSI Manufacturing Index An improvement from -10.5 to -0.4 in the April-June 2023 quarter vs. an estimated reading of -4.2, reflecting weaker pessimism
Japan exports They rose 0.6% year-on-year in May, the slowest pace since February 2021, while imports fell 9.9% year-on-year, thanks in part to lower fuel prices.
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Japanese producer prices It rose 5.1% year-on-year in May, slower than the previous gain of 5.9% and the expected increase of 5.6%.
Preliminary orders for Japanese machine tools It fell 22.2% year-on-year in May, sharper than the previous drop of 14.4%.
Basic machinery orders in Japan It rose 5.5% month over month in April, the first increase in three months. On a yearly basis, core orders decreased by 5.9% (vs -8.0% expected).