Drivers for the Week Ahead

Blog icons-DRIVERS

  • The US, Japan, and the Eurozone all report their preferred inflation measure in the days ahead
  • Two of Italy’s banks become the second and third banks in the EMU to be subject to the supervisory authority of the ECB
  • If the Senate cannot pass a healthcare reform bill, it will raise more doubts about the broader economic legislative agenda

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Dollar Pares Gains Ahead of the Weekend

Usa - United States flag in speech bubble

  • Flash manufacturing PMI for Japan and flash PMIs for the Eurozone had little impact on the capital markets.
  • In the US, politics is eclipsing economics in the week after the FOMC hiked the Fed Funds target
  • Markit reports the flash PMIs for the US today, and the government reports existing home sales; three Fed officials speak ahead of the weekend.
  • Brazil mid-June IPCA inflation is expected to rise 3.48% y/y vs. 3.77% in mid-May

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Drivers for the Week Ahead

Blog icons-DRIVERS

  • It is a light week for economic data from the G7 
  • The Reserve Bank of New Zealand and the Norway’s Norges Bank hold policy-making meetings 
  • Five events to watch: Brexit negotiations, Queen’s Mansion House Speech, MSCI decision, Italian banks, Georgia special election 
  • We remain cautious on EM and think that investors should avoid the high beta currencies like ZAR, TRY, BRL, and MXN 

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Dollar Trades Higher in Wake of the FOMC

US dollar sign with keyhole and key (Digital)

  • We stick with our initial impression that the Fed was more hawkish than many expected
  • The Bank of England meets but may be overshadowed by the Mansion House speeches tonight by Hammond and Carney
  • Aussie is outperforming after stronger than expected jobs data
  • EM monetary policy has decoupled from the Fed, at least for now; Bank Indonesia kept rates steady at 4.75%, as expected
  • Central Bank of Turkey is expected to keep all rates steady; Chile central bank is expected to keep rates steady at 2.5%

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In the Run-Up to the FOMC

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  • The US dollar is narrowly mixed ahead of the FOMC meeting, where a dovish hike seems widely expected
  • Investors are more interested in the forward guidance rather than the rate move itself
  • Chinese consumers continue to shop
  • Sterling had extended yesterday’s recovery before poor weekly earnings data stopped it in its tracks
  • South Africa April retail sales are expected to rise 0.6% y/y

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