When Bank of England Governor Bailey said that an interest cut was “not a fait accompli” for June it has been ringing alarm bells in my head ever since.
I also found it very interesting that last week Barclays, HSBC and TSB all announced cuts in their fixed-rate mortgages. Do these banks know something that the Monetary Policy Committee doesn’t? Or already does?
This week, the MPC which as we know from last week’s post, is not beholden to the Fed to make its decisions and carefully scrutinizes domestic data, has one very big data release to help it with its next interest rate decision; UK inflation figures! A big drop in UK inflation is expected. After which, in my mind, a UK interest rate cut in June IS a “fait accompli!”
It’s true that worldwide inflation seems to be heading lower. Last week headline inflation in the US dropped to 3.4% and core dropped to 3.6% y.o.y for April. German inflation held at 2.2%. Eurozone inflation printed 2.7%.
This week, the major release is UK inflation figures, out on Wednesday, with expectations for headline inflation to fall to 2.1% (or lower) and core to drop to 3.7% for April. May inflation figures will be released on 19th June and the next Bank of England interest rate announcement is on June 20th. So, for the UK and its currency pairs GBPUSD, EURGBP and other GBP crosses, Wednesday’s data release is likely to be impactful and market moving!
Other major announcements this week are Canadian Inflation figures, out on Tuesday with expectations for a fall in the headline number to 2.8%, an RBNZ interest rate announcement early Wednesday morning with “unchanged at 5.5%” the likely outcome, and FOMC minutes released on Wednesday evening.
Friday, early morning and Japanese year on year inflation for April is expected to drop to below 2.7% for headline and to 2.2% for core, German Q1 GDP y.o.y growth is forecast at negative 0.2% for the first quarter, monthly US durable goods orders are expected to plummet to 0.5% for April following March’s impressive 2.6%, and Michigan Consumer Sentiment is also likely to have dropped considerably for May to 67.4 from April’s 77.2
We may see some volatility in currency markets this week!
Good Luck and Good trading!
By Ben Robson
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
