Weekly Outlook, 21-25 June 2021

Testify and GDP in the US, Monetary Policy in UK and China

By: Ahura Chalki

Market analyst – IFC Markets

Fed still will run the sentiment; however, Mr. Powell’s testimony, Mrs. Lagards speech, Chines and British Monetary policy, and Interest rate decisions also will be important. On the other hand, we have many economic data that have to deal with them. So let’s take a look at the most important events of the week ahead. 

PBoC Interest Rate Decision – Monday 

As the People’s Bank of China announces no change will be admitted in the next 12 months, we are not expecting any changes in the policies and interest rates. Moreover, we do not have any changes for expected economic growth in 2021; holding the policy supports the economic recovery path. Therefore, since the policy is not changing and previous Chinese data were a bit lower than expected, we are still expecting a recovery in USDCNH to continue.  

USDCNH

Powell testimony – Tuesday

Tuesday, Federal Reserve Governor will testify before the House Select Subcommittee on the Coronavirus Crisis. The subject of testimony will be “the Fed’s emergency lending programs and current policies.” In line with other FED speakers during the week, this testimony will be matter because investors will be looking for any proof on the future direction of FED monetary policy. FED’s other speakers of the week will be John Williams, James Bullard, Loretta Mester, Mary Daly, Raphael Bostic, and Eric Rosengren.

European PMI – Wednesday

With large parts of Europe locked down until June, it’s hard to see any significant improvement in the May economic data. For both Service and Manufacturing numbers, while we expect that progress will start from June in most parts of Europe, slightly weaker numbers are still estimated for May. Between the European countries, most focus will be on German and French Manufacturing numbers. With these estimates, the current downtrend of EURUSD is still the general expectation. 

EURUSD

Bank of England – Thursday

The fourth meeting of 2021, after the inflation report update from May, will behold on Wednesday. While the economy is rising much faster than expectations and the BoE GDP forecast for 2021 increased from 5% to 7.5%, they reduced the weekly bond purchasing to 3.4 billion pounds every week. Even though Mr. Andrew Bailey insisted that this was an operational decision and not a tapering of asset purchases, the market accepted that as a Hawkish signal. Therefore, we are not expecting any changes to the Wednesday meeting’s current policies and interest rates, especially with a one-month delay in the last stage of reopening. With higher levels that we are expecting for the US dollar, and no change in monetary policies in the UK, lower levels for Cable is more likely.  

CABLE

US economic data – Friday

While the economic calendar will cover the new and existing home sales, durable goods orders, manufacturing, service sector activity, and the weekly report on initial jobless claims, market participants will mostly follow the PCE and Personal Spending and Income numbers. This data must tell us more whether the fastest price raises in almost 13 years will be continuing or not. 

Friday, we are waiting for Personal income and spending data for May, and it will include the core PCE price index. And since the market is still waiting for higher inflation, at least in the middle-term, the continuation of the downtrend in US stock markets seems more likely.

SP500


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