There will be a lot of disappointed borrowers in the UK after last week’s Bank of England “unchanged” interest rate decision.
Governor Bailey says the Bank’s Monetary Policy Committee looks at the data and is not dependent on the US to make its decisions. They also look at what’s going on in the World.
Well, I see a world in which inflation is generally falling; it’s a bit stubborn in some places- e.g. the US- but in Canada, the Eurozone and Switzerland, Central Bankers have come to the opinion that an initial cut (or two in the case of the Swiss) is appropriate for the moment.
Have a look at the Bank’s range of outcomes for the future of UK inflation
Maybe they should issue a joke warning! Safe to say, that all outcomes are covered, and far easier to sit on the fence and do nothing. UK GDP is in the doldrums and unemployment is rising. I appreciate there is a forthcoming General Election, but to me a small cut was merited.
To this week and Governor Bailey and his team will be relieved that there are some useful Canadian and US inflation metrics to help colour in the World picture. We also have US Consumer Confidence, Michigan Consumer Sentiment, US Durable Goods and US and UK GDP figures, a Swedish Riksbank interest rate decision,as well as German Consumer Confidence and employment numbers.
On Tuesday, Canadian Headline Inflation is expected to fall to 2.6% y.o.y for May. US Consumer Confidence is forecast to drop slightly to 100 for June from 102 last month. On Wednesday, German Consumer Confidence is expected to be less negative for July (-19.8 vs -20.9 for June).
On Thursday morning, a Swedish interest rate decision will be announced (currently 3.75%). In the afternoon, US Durable Goods Orders are expected to have fallen to +0.3% for May. US Q1 GDP is forecast to print 1.3%.
On Friday, first up is UK GDP with expectations for a 0.2% reading. Consensus is for German unemployment to remain at 5.9%. Both US Core and Headline PCE (the Fed’s preferred gauges of inflation) are expected to have fallen to 2.6% y.o.y for May. Michigan Consumer Sentiment is likely to have fallen for June to 65.9 from a prior reading of 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
