FX Week Ahead – Top 5 Events: UK Inflation Rate; inflation rate in Canada; Powell testimony; inflation rate in Japan; German business climate Ifo
Preview of the week ahead:
- The coming week will offer more information on weakening growth and record inflation around the world.
- Inflation data from Britain, Canada and Japan in May will keep markets focused on how central banks plan to reduce price pressures.
- Fed Chairman Jerome Powell’s testimony to Congress this week comes just days after the Federal Reserve raised rates by 75 basis points for the first time since 1994.
For the entire week ahead, please visit the DailyFX Economic Calendar.
22/06 WEDNESDAY | 06:00 GMT | Inflation rate in GBP (MAY)
Price pressures in the UK remain well above the Bank of England’s comfort level, and the next round of inflation data will do little to ease concerns. According to a Bloomberg News survey, the UK inflation rate (CPI) in May is expected to come in at +0.6% m/m vs. +2.5% m/m and +9.1% y /y versus +9% y/y, while core inflation is expected at +6% y/y versus +6.2% y/y. Just last week, the BOE’s Monetary Policy Committee vowed to act more “forcefully” to tackle decades-long highs in price pressures. However, any evidence that inflationary pressures have peaked could underscore the BOE’s balanced concerns about sluggish growth, which in turn could weigh on the pound sterling.
22/06 WEDNESDAY | 12:30 GMT | CAD inflation rate (MAY)
Price pressures continue to mount in Canada, despite aggressive action by the Bank of Canada in recent weeks to curb the rapidly rising cost of living. According to a survey by Bloomberg News, Canada’s inflation rate (CPI) in May is expected to come in at +1%m/m vs. +0.6%m/m and +7.4%y/y vs. + 6.8%y/y, while core inflation is expected at +0.8%m/m from +0.7%m/m and +5.9%y/y from +5.7% y/y. The June BOC Policy Statement included the phrase “the Governing Council stands ready to act more forcefully if necessary to meet its commitment to achieve the 2% inflation targetand Canadian inflation data coming in May could help spur speculation of another 50 basis point rate hike when policymakers meet in mid-July.
22/06 WEDNESDAY | 13:30 GMT & 06/23 THURSDAY | 14:00 GMT | Fed Chairman Powell presents semi-annual monetary policy report to Congress
Fed Chairman Jerome Powell will deliver his semiannual testimony to the U.S. House of Representatives and Senate on Wednesday and Thursday, a week after the Fed’s June rate decision that produced the first 75-point rate hike base since 1994. Policy Report, published June 17, it was noted that “tThe Committee’s commitment to restore price stability – what is needed to maintain a strong labor market – is unconditional.“Inflation rates in the United States remain near their highest levels in 40 years, which is likely to attract the most attention among Democrats and Republicans. The focus on strong inflationary pressures could be the catalyst needed for US rates markets to price in another 75 basis point rate hike in July.
23/06 THURSDAY | 23:30 GMT | JPY inflation rate (MAY)
Japanese inflation rates continue to climb, thanks in part to the weak Japanese yen and steadily rising coal and oil prices (Japan imports over 90% of energy consumed). According to a Bloomberg News survey, Japan’s May CPI inflation rate is expected at +2.6%y/y vs. +2.5%y/y and the core inflation rate is expected to remain unchanged at +2.1% y/y. April’s rise of +2.5% y/y was the fastest rate since October 2014. Despite mounting political dismay, the Bank of Japan doubled (tripled?) its commitment to its QQE with a control policy the yield curve last week and incoming inflation data could see Japanese bond markets come under further strain.
24/06 FRIDAY | 08:00 GMT | EUR German Business Climate Ifo (JUN)
Estimates of European growth continue to plummet, no doubt linked to the Russian invasion of Ukraine. But the hangover from the coronavirus pandemic is also a contributing factor, and the lack of desire for fiscal stimulus in the face of decades-high inflation rates suggests stagflation conditions are setting in across the eurozone. Germany’s June Ifo business climate survey is expected to highlight continued weakness in the euro zone’s largest economy, which will do the euro a disservice as echoes of the Eurozone debt escalates amid sharply rising peripheral borrowing costs after the European Central Bank’s June meeting on tariff decision.
— Written by Christopher Vecchio, CFA, Senior Strategist