Week ahead: RBA, Bank of England in stick or twist mode

The Reserve Bank of Australia is a coin toss whether it’s going to hike or hold. The Bank of England is also on a knife-edge – a June cut is on the table, but it may prefer to wait until August. But with UK inflation data out this week off the back of a two-year low for unemployment and weak April GDP report we could see the MPC swing into dovish mode. Elsewhere, the Swiss National Bank may choose to hold following inflation data and there is a busy finish to the week with the round of flash PMIs.

Here are the week’s key events:

Monday, June 17th: China Data, G7 Meetings

A batch of Chinese data kicks off the week – industrial production, retail sales and fixed asset investment figures setting the tone for the Asian session. Watch for some potential reaction to G7 meetings in Italy (June 13-15th), which come at a tricky time for some of the world’s major economies politically – the UK general election, French snap parliamentary election and a looming presidential race in the US add a bit of spice to the summit. The Empire State manufacturing index is due ahead of the cash equity open on Wall Street.

Tuesday, June 18th: Reserve Bank of Australia Rate Decision 

The Reserve Bank of Australia has left the possibility of a rate hike on the table and economists are split over whether the central bank sticks or twists. Of the country’s big four banks, ANZ and NAB think the RBA pulls the trigger on a hike, whilst CommBank and Westpac think policymakers will hold fire. Elsewhere we are looking at final Eurozone inflation data and German economic sentiment data in Europe. In the US, retail sales figures will be the major focus to see if the consumer is showing further signs of stress – a month ago the key retail sales control group declined by 0.3%. US industrial production figures are also due.

Wednesday, June 19th: UK Inflation

UK inflation will be the major event as markets seek clarity on what the Bank of England is about to do. It’s come down a lot – from 3.2% in March to 2.3% in April, the slowest since September 2021 and broadly within the Bank’s target. But services inflation remains sticky, declining to just 5.9% vs 5.5% expected. More recent data showed wage growth remains strong at 6% but unemployment has risen to a two-year high. Lagging indicators like inflation and wages may start to take a back seat to the more pressing concerns of employment and stagnant growth with data showing the economy failed to grow in April.

Thursday, June 20th: Bank of England Rate Decision

Bank of England day comes with market participants uncertain whether the MPC opts to cut. Disinflation is a bit slow, but growth and employment are softening underneath them. Time to cut?  

In May, after holding again, Bank of England Governor Bailey indicated that a rate cut next month was a possibility. “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgment afresh,” he said. “But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.”

Meanwhile the Swiss National Bank (SNB) is seen holding rates after the recent uptick in the inflation to 1.4% over the last two months. The PBOC will set one-year and five-year loan prime rates, the key China interest rate decision. Philly Fed manufacturing and US weekly unemployment claims are the highlights for the North American session.

Friday, June 21st: US, UK, Eurozone PMIs, Japan Core CPI  

PMI Day! Flash purchasing managers indices for manufacturing and services sectors round out the week with a blitz of eco data for market watchers. We get updates from the Eurozone, UK and US. Also watch the latest UK retail sales figures and Japan’s national core CPI inflation print. Existing home sales in the US and Canada’s retail sales data is also on the calendar.