UK: Weekly FX Market Update 12 June

GBP

In a week that lacked UK data releases, GBPUSD had a good week, gaining 1.0%.

Could this reflect the markets interest rate expectations of a June hike for the UK and a possible pause for the US?

The UK GDP number will be released on Wednesday. Did the UK economy grow in May after April’s 0.3% decline?

Wednesday also sees the US Federal Reserve deciding on its interest rates – what will the impact be on GBPUSD?

Will the ECB rate decision on Thursday keep GBPEUR below its six-month high?

EUR

EURUSD enjoyed a respite from recent downward pressure as the market considered a possible US rate pause.

This was despite the eurozone officially dropping into a mild recession, with the economy contracting by 0.1% in both of the last two quarters.

Event risk for the Euro includes ZEW economic sentiment on Tuesday, the ECB interest rate decision on Thursday and Eurozone Final CPI on Friday.

The market does expect a rate hike from the ECB on Thursday. Will the latest contraction in Eurozone GDP halt the ECB’s plans for rate hikes in the autumn?

USD

Ahead of the FOMC decision on Wednesday, the Reserve Bank of Australia and Bank of Canada set the tone with rate hikes in June – with both respective currencies gaining against the USD.

US CPI is released on Tuesday – how influential could the expected fall to 4.1%, from 4.9%, be when the votes are counted?

If a rate pause is decided, could this cause a period of US dollar weakness?

Bloomberg predicts only a 25% chance of a US rate hike this month, and a 55% chance of a rate hike in July.

What will Fed Chair Powell say in his press conference?

Industrial Production and Consumer sentiment round off what could be a busy week.

Events for the week ahead:

Mon Jun 12

No Top Tier Data

Tue Jun 13

07:00 GBP Claimant Count Change/Average Earnings/Unemployment Rate

10:00 EUR ZEW Economic Sentiment

13:30 USD CPI

15:00 GBP BoE Gov Bailey Speaks

Wed Jun 14

07:00 GBP GDP/Industrial Production/Manufacturing Production/Goods Trade Balance

13:30 USD PPI

19:00 USD FOMC Interest Rate Decision/Economic Projections/FOMC Statement

19:30 USD FOMC Press Conference

Thu Jun 15

02:30 AUD Employment Data/RBA Bulletin

03:00 CNY Industrial Production

08:00 EUR Bundesbank President Nagel Speaks

13:15 EUR Interest Rate Decision/Statement

13:30 USD Retail Sales/Empire State Manufacturing Index

13:45 EUR ECB Press Conference

14:15 USD Industrial Production

Fri Jun 16

00:01 JPY Bank of Japan Interest Rate Decision/Press Conference

10:00 EUR Final CPI

15:00 USD Preliminary University of Michigan Consumer Sentiment