TOP 5 EVENTS TALKING POINTS:
- At long last, the highly anticipated June Fed meeting is on deck. All other economic data releases will be playing second fiddle over the coming week.
- Inflation reports from the UK and Canada will show that the oil price plunge since April has started to weigh down headline inflation again.
- The Q1’19 New Zealand GDP report might not give the RBNZ more evidence to support its efforts to cut interest rates.
06/19 WEDNESDAY | 08:30 GMT | GBP Consumer Price Index (MAY)
With oil prices falling more than 20% from their 2019 highs, measures of inflation are being pulled lower across the developed world – and the UK should not be immune from this emerging trend of disinflationary pressures. According to a Bloomberg News survey, the forthcoming May UK inflation report is due to show headline inflation in at 2% from 2.1% (y/y), while the monthly reading is due in a 0.3% from 0.6%. Core CPI is expected to have eased to 1.7% from 1.8% (y/y).
06/19 WEDNESDAY | 12:30 GMT | CAD Consumer Price Index (MAY)
The pullback in oil prices in recent weeks appears ready to put a cap on the rebound in Canada inflation – no different than what’s being experienced across the rest of the developed economic world. Crude oil prices plunged by -15.9% in May, weighing significantly on the yearly performance: at their peak, crude oil prices were up by 46.7% in 2019; at the time of writing, they were only up by 16.2% in 2019. Accordingly, a Bloomberg News survey shows consensus forecasts pointing to headline May Canada inflation due in at 2%(y/y), unchanged from April’s pace of price pressures. The monthly reading is due in at 0.1% from 0.4% (m/m), clearer evidence disinflation is starting to appear.
06/19 WEDNESDAY | 18:00 GMT | USD Federal Reserve Rate Decision & Powell Press Conference
With trade war concerns raging and global financial markets’ volatility steadily pushing higher, the Federal Reserve’s June meeting on Wednesday comes at a critical moment. The prospect of the US economy’s record 10-year expansion being threatened has garnered the attention of policymakers, with Fed Chair Jerome Powell saying that the Fed would “act as appropriate” if needed in a speech at the start of June. Overall, interest rate odds have taken an aggressive dovish turn, pulling forward expectations of three 25-bps rate cuts into 2019. While the Fed is unlikely to act in June, it’s very possible that they initiate the first rate cut as soon as the next meeting in July.
06/19 WEDNESDAY | 22:45 GMT | NZD Gross Domestic Product (1Q)
Monetary policy in New Zealand has taken on a more dovish tone in recent months, with the 25-bps rate cut coming at the May RBNZ meeting. Concerns over the fallout of the US-China trade war, involving two of New Zealand’s three largest trading partners, coupled with softness in inflation readings provoked the RBNZ into efforts to mitigate any issues for the economy before they begin to gather pace. In turn, Q1’19 New Zealand GDP appears to have avoided any significant fallout, with a 2.4% annualized growth rate expected, slightly higher than the 2.3% observed in Q4’18.
06/20 THURSDAY | --:-- GMT | JPY Bank of Japan Rate Decision
What you will read next should not come as a surprise: the BOJ will leave rates on hold at its meeting this coming week. With inflationary pressures below the BOJ’s target, growth underwhelming, and concerns proliferating about global trade, there’s no reason why the BOJ would deviate away from its ultra-accommodative policy stance. Given that the disinflationary, low growth environment sees no end in sight, the BOJ can’t really use its regularly scheduled policy meetings to effectuate meaningful changes in investor behavior; instead, the BOJ is more likely to surprise market participants with actions in between meetings.
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher, email him at email@example.com