After last week’s strong -Non-Farm Payroll data, this week once again focuses on the US economy as we will receive an update on US inflation as well as an interest rate announcement.
The Bank of Japan too will announce its interest rate decision. Last week both the Bank of Canada and European Central Bank cut interest rates. The Bank of England is likely to cut next week. What will the Fed do? I think US interest rates will remain “unchanged” at 5.5%. We will see how the week unfolds, but you can be sure that US inflation numbers are going to be keenly awaited by many.
So, we are Monday 10th June and already Japanese Q1 GDP (y.o.y) has been released and was quite a shocker at negative 1.8%. For me, USDJPY is an interesting currency pair. The positive 5 or more percent carry is intact and this week’s interest rate announcements should do little to affect it. We know the Japanese MOF intervened at 160 to strengthen the yen so there is a real danger to going all-in USDJPY, but a small long in USDJPY seems to accrue a nice interest rate yield for those who are prepared to embrace the risk. The Bank of Japan announces its interest rate decision on Friday. Consensus is for “unchanged” at 0-0.1%.
The UK’s big economic numbers for this week come tomorrow and Wednesday. UK employment data is printed tomorrow with the unemployment rate penciled in to remain at 4.3%. UK GDP is out on Wednesday. Expectations are for the month-on-month figure for April to be flat or 0.0%. German CPI is also out on Wednesday with the year-on-year figure for May expected to have risen to 2.4% (from 2.2%). Wednesday afternoon and we will see US inflation figures. Economists are predicting a headline number of 3.4% and a core number of 3.5% (y.o.y) for May. The Fed will reveal its interest rate decision in the evening. Remember to pay heed to the press conference.
Australian employment numbers are out early on Thursday morning with expectations for a slight fall in the number of unemployed to 4.0%. US Producer Prices are the afternoon’s main event. US PPI (m.o.m) for May is expected at 0.2%.
Aside from a Japanese interest rate announcement on Friday the afternoon’s main figure is the University of Michigan’s preliminary Consumer Sentiment forecast for June. The consensus view is for this to rise to 73 from last month’s 69.1.
Good Luck and Good trading!
Ben Robson is Head of Institutional E-FX at Swiss Finance Corporation. He is also the Amazon Best Selling Author of Currency Kings – How Billion traders Made their Fortune Trading Forex. McGraw Hill 2017
