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The rates of the G10 currencies at the end of last week were not much different than they were at the beginning of it. There was little news and investors were still pondering the central banks' announcements. Last week's winner was the Swiss franc. The price of this currency received a boost in the aftermath of the spectacular hawkish surprise by the Swiss National Bank earlier this month. There was a lot going on in emerging market currencies, but most of them held up quite well given the large-scale sell-off we saw in commodities last week.
Last week's rally in risk assets suggests that investors are a little less concerned about an inevitable recession as central banks do their best to get inflation under control. This week, attention on both sides of the pond will be on Thursday's inflation data. In the US, the private consumption expenditure (PCE) figures for May are likely to confirm the previously released CPI (consumer price index) report. The flash report on inflation in the eurozone in June will be more important, as it will give us a first impression of inflation in all economic zones. If the headline figure jumps above 4%, it would put even more pressure on the ECB to accelerate its schedule for rate hikes. This could support the exchange rate of the single currency. Below are the main currencies in detail:
The June economic activity PMI indicators were generally disappointing, as there was a significant decline. While they still point to growth for all major eurozone economies, this downward trend should be closely monitored, as the PMIs are still the best, most important indicator of economic growth in Europe.
sdadThis week could be very important for the euro. Not only do we get the flash report on inflation in June, but also the annual ECB forum on central banking. Markets expect at least some additional information to be provided on the promised anti-fragmentation tool.
In the UK, inflation in May was again the highest in decades. However, the headline figure (which excludes volatile food and energy prices) gave a glimmer of hope: it remained just below 6%, which was lower than expected. The exchange rate of the British pound still follows the risk actsdsdiva. The currency benefited from the recovery in the global stock market last week. This week we will be on the lookout for consumer credit. We believe that consumers will be able to cushion the decline in real incomes through the use of savings they have accumulated during the pandemic, and this week will show whether we are right in the world. Below are the main currencies in detail:
After reaching its highest levels in many years, the dollar fell slightly last week. This seems to be caused by three factors. First, there is a pullback in US yields. Markets are increasingly reluctant to price in more interest rate hikes by the Fed in the short term. Second, there is an overall rebound in risk sentiment, which is now having a clear negative impact on the dollar as a safe haven. Finally, investors seem to have more and more 'long' positions in the dollar. There is almost consensus on a stronger greenback, which means that rallies are no longer possible and small setbacks lead to stop-loss sell-offs. If the inflation report for the eurozone is strong on Thursday, it could lead to a significant countertrend in the form of a sell-off in the dollar.
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
