Market Report
GBP
Sterling had a poor week last week, losing ground against the USD for the 3rd week running, after the Bank of England raised rates by only 25bps, failing to join the growing theme of central bank hawkishness sweeping across developed markets.
The outlook for the GBP remains rather poor, given rapidly slowing economic growth (Apr GDP -0.3% MoM), in addition to the further acceleration in inflation that we are set to see in the latest data this Wednesday.
Besides the inflation release, market participants will focus on last month’s retail sales report, in addition to a host of speeches from BoE policymakers.
EUR
The common currency also struggled last week, despite the ECB increasing work on a new policy tool to prevent so-called ‘fragmentation’ across the bloc.
Amid an increase in hawkishness from the Fed, the EUR fell to test $1.05, ending the week around this level, recording a third weekly drop.
Looking ahead, this week’s calendar is rather quiet, leaving the EUR to be driven by external events.
USD
The FOMC hiked rates by 75bps last week, the largest hike in almost 30 years, while also signalling further such hikes to come, as policymakers continue to battle surging inflation, despite a slowing economy.
Markets largely took the supersized hike in their stride, however the dollar did end the week in the green for the third week in a row, with the Fed remaining one of the most hawkish G10 central banks.
Looking ahead, a quieter calendar awaits this week, with market participants set to continue digesting the FOMC decision.
World News
French President Emmanuel Macron, who was re-elected just 2 months ago, has lost control of the French National Assembly following better than expected performances from both Left and Right opposition parties. The President’s centrist party is now looking to more right-wing republicans to form a majority government with after branding the result a ‘stinging failure’. This now puts Macron’s reforms at serious risk, with an increase to retirement as well as cutting taxes and increasing benefits at risk of not passing through the French Assembly.
Ukraine President Zelensky has warned Russia is set to intensify its attacks on Ukraine in the coming days as he awaits news on their bid to join the EU. The Bloc is set to decide whether to award Ukraine with ‘candidate status’ later this week, a move that will begin the process of Ukraine’s accession to the union.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 20th June | CA | Core Retail Sales m/m | 2.40% | 0.50% |
| Wednesday 21st June | UK | CPI y/y | 9.00% | 9.10% |
| Wednesday 21st June | CA | CPI m/m | 0.60% | 1.00% |
| Thursday 22nd June | EU | Flash Services PMI | 56.1 | 55.6 |
| Thursday 22nd June | EU | Flash Manufacturing PMI | 54.6 | 53.9 |
| Thursday 22nd June | UK | Flash Services PMI | 53.4 | 53 |
| Thursday 22nd June | UK | Flash Manufacturing PMI | 54.6 | 53.8 |
| Thursday 22nd June | US | Flash Services PMI | 53.4 | 53.9 |
| Thursday 22nd June | US | Flash Manufacturing PMI | 57 | 56.2 |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7016.25 | 7016.25 |
| DAX | 13126.26 | 13207.79 |
| CAC40 | 5882.65 | 5901.58 |