What's Awaiting the Markets this Week

This week will be quiet on data from the US with the main highlight being the US weekly Jobless claims print on Thursday, followed by Flash PMI on Friday.

We will certainly be seeing more activity across the pond with UK and Switzerland both releasing their latest policy statement and forward guidance on Thursday.

As we see the UK’s latest CPI on Wednesday, markets will be expecting a fall in CPI whilst CORE CPI is expected to remain unchanged.

Another 0.25% hike is forecasted by BoE - the real key will be the forward guidance given. The markets are already pricing in 4 further hikes before year end.

SNB are forecasted for .05% hike, however; this could be slightly generous given the drop in inflationary data. In turn, a 0.25% hike would provide some short-term opportunities.

UK: CPI & BoE

Inflation is currently a huge problem for the UK, with CPI just shy of 7% and Core shy of 9%.

Inflation is hot, and the cost of living is posing a massive threat on the UK's economy.

Although the news out of the UK isn’t exactly the greatest, STERLING £ has managed to remain strong in the FX markets. There are a few hurdles this coming week for STERLING with CPI, BoE, Flash PMI Manufacturing and Services.

 As you can see, the markets have priced in 4 further rate hikes by year end, meaning that should the BoE feel this is a too aggressive outlook from the markets, it may just try to push back. This would see a selloff in STERLING. Moreover, CPI miss or beat could also add some extra pressure on the currency.

SNB Policy

We can expect the policy decision to maybe cause a shock, as inflation has been slowing more aggressively.  CPI dropped from 3.4% in Feb to 2.2% in May. More importantly the CORE data dropped below the 2.0% target of the SNB. 

The forecasted hike of 0.5% could be a little over ambitious by 62% of the market, although this position taken is down to the HAWKISH comments from SNB Chairman Jordan.

There will be 2 trades I will be watching for pending the outcome of the SNB both will be to sell the CHF.

  • First the SNB hike 25bps, less than forecast and expect short-term selling.

  • Secondly the o.5% hikes as forecasted by most of the market, but then suggest that’s the hiking cycle over.

    Therefore, the initial upside could be short live and an opportunity to fade the rally.

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