A Spotlight on the Week to Come: Federal Reserve, UK Economic Performance, and Bank of England

This week is set to be action-packed, with a focus not just on preliminary private sector figures for June, but also on central banking activities globally.

Keeping an Eye on the Macro

A host of economic indicators from Europe, the UK, and the US will be released this week, offering investors a mid-year glimpse into the state of the macroeconomic climate.

Additionally, central banks will be making significant strides. The Bank of England is expected to make its pre-summer interest rate decision, while Federal Reserve Chair Powell will testify at Capitol Hill, offering key insights.

The Dollars Week Ahead

This week seems relatively calm on the US economic calendar. On Thursday, the attention will be on jobless claims data that could impact market sentiment. A decrease in jobless claims could pave the way for a Fed interest rate increase in July. However, it's likely that the preliminary private sector PMIs for June, set to be released on Friday, may wield greater influence. A softer performance in the services sector may tip the scales towards a pause by the Fed.

Besides the statistics, words from the Fed will also draw much attention. Members of the FOMC such as Bullard, Williams, Mester, Bowman, and Bostic are set to speak. Yet, the market's focus will be on Fed Chair Powell's Capitol Hill testimonies on Tuesday and Wednesday, where his economic outlook and monetary policy comments are likely to impact markets.

EURs Calmer Week

The week appears to be slightly quieter for the EUR. On Tuesday, the German wholesale inflation data will attract attention, considering inflation is the ECB's central concern. If wholesale inflation numbers are softer, they could challenge the ECB's raised inflation forecast for 2023.

However, preliminary private sector PMIs for France, Germany, and the Eurozone will carry more weight. Any significant contraction in the manufacturing sector and decelerating growth in the services sector could apply downward pressure on the Eurozone economy.

In addition to the statistics, investors should pay heed to the ECB commentary. Speeches by ECB Chief Economist Philip Lane and Executive Board members Luis de Guindos, Fabio Panetta, Andrea Enria, Isabel Schnabel, and Elizabeth McCaul are anticipated throughout the week.

Eventful Week for the Pound

The week is set to be bustling for the Pound. On Wednesday, the UK CPI report will be closely watched. As the Bank of England is set to announce its June interest rate decision on Thursday, any unexpected inflation data could trigger a reaction from the Pound.

The Bank of England is due to make its pre-summer interest rate decision on Thursday. A hawkish increase of 25 basis points in interest rates would resonate with recent economic indicators, implying a necessity for more robust policy actions to counteract inflation.

Concluding the week on Friday are the retail sales figures and preliminary private sector PMI data. Strong retail sales and a boost in the service sector could lay the groundwork for further BoE policy moves.

Loonie's Week

The Loonies economic calendar appears light this week. Retail sales data due on Wednesday is expected to draw attention, especially after a substantial decline in March. An increase in retail sales could intensify expectations for another rate hike by the BoC.

Other data to be released include the RMPI, manufacturing sales, and wholesale sales numbers. However, these are not anticipated to significantly sway market sentiment.

The Week Ahead for the Aussie, Kiwi, and Japanese Yen

For the Aussie Dollar, this week is relatively placid with no significant economic indicators on the horizon. However, Tuesday's RBA meeting minutes will capture attention. Investors are keen to glean any insights into potential future rate moves following the recent June interest rate hike.

RBA Assistant Governors Kent and Bullock, scheduled to speak on Tuesday, may provide a clearer understanding of the RBA's stance in the post-June period.

In the case of the Kiwi Dollar, consumer sentiment and trade data will take center stage this week. Although consumer sentiment numbers might generate some reaction, trade data is expected to have a stronger impact. Given the pressure weak global demand has placed on trade terms, a dip in exports could challenge buyer enthusiasm.

Meanwhile, it's an active week for the Japanese Yen, with industrial production data expected to garner interest on Tuesday. After the unexpectedly strong core machinery orders in April, a rise in industrial production could boost the Yen.

However, inflation and private sector PMIs due on Friday could have more influence. The markets will be seeking justifications for the Bank of Japan to adjust its ultra-loose monetary policy. Any signs of easing inflation and a recovery in the private sector would back such an adjustment.

Also from the Bank of Japan, the monetary policy meeting minutes from the May gathering are expected to draw interest on Wednesday. Yet, surprises are unlikely given that last weeks Bank of Japan press conference is fresher in investors' minds and deemed more pertinent.

Out of China

In China, it's a relatively quiet week ahead with no major economic indicators scheduled. However, the Peoples Bank of China's announcement on Loan Prime Rates (LPRs) on Tuesday is likely to wield influence. Given the recent disappointments in economic indicators, the PBoC is predicted to decrease borrowing costs. A cut in the LPRs could bolster riskier assets.

Analysts forecast the PBoC to reduce the 5-year LPR from 4.3% to 4.2% and the 1-year LPR from 3.65% to 3.55%.

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