The Week Ahead: US retail sales, UK inflation, central bank rate decisions

Stock markets appear to have recovered from the tariff tantrum of April and May. Among the indices to settle back into a trading range is Wall Street’s benchmark index the S&P 500, up 3% for the year, as of Friday morning. The coming week’s scheduled economic events – including interest rate decisions from the Bank of Japan, the US Federal Reserve and the Bank of England – shouldn’t unsettle equity markets, with analysts expecting the trio to keep rates on hold. However, sensitive bond and currency markets may fluctuate on policymakers’ comments, especially given the recent rise in long-end rates in Japan, the US and the UK. That could lead to further dollar weakness.

US May retail sales

Tuesday 17 June
There are unlikely to be any surprises in the latest US retail sales figures, with analysts forecasting a modest 0.1% month-on-month increase for May – a repeat of the April figure. If growth comes in flat, or sales fell, the reading could contribute to further dollar weakness, particularly against the euro, which in recent days has broken above resistance at $1.15.

A weak retail sales print could push EUR/USD higher, potentially towards a four-year high of $1.19. Upward momentum in EUR/USD remains strong. The relative strength index (RSI) has climbed to a reading of 66, suggesting that there may be further room for EUR/USD to rise, though minor resistance around $1.17 may be an obstacle.

UK May CPI, Bank of England rate decision

Wednesday 18 June (CPI), Thursday 19 June (BoE)
The UK’s consumer price index jumped 3.5% in the year to April, up from 2.6% in March, driven by higher energy bills and rising prices for transport and food. Unless figures out on Wednesday show that inflation eased significantly in May, the Bank of England is likely to keep the base rate at 4.25% when monetary policy committee members vote on Thursday. 

Given ongoing concerns about inflation and the unlikelihood of a rate cut in the near term, the pound could soon retest the three-year high of $1.363 against the US dollar that it reached earlier today before slipping back. If GBP/USD’s uptrend since the start of the year continues, and the RSI remains bullish, the pair may have further upside potential. A breakout above Friday’s high could push GBP/USD towards $1.39.

US Federal Reserve and Bank of Japan rate decisions

Wednesday 18 June (Fed), Tuesday 17 June (BoJ) 
Neither the Fed nor the BoJ is expected to adjust interest rates at their upcoming meetings. However, the Fed will release its Summary of Economic Projections, which should give the market insights into the central bank’ s thinking regarding the future direction of monetary policy. Investors will also be paying close attention to what policymakers in Tokyo say about the path forward for monetary policy and how they plan to manage the balance sheet, especially given the recent rise in 30- and 40-year yields on Japanese government bonds. 

The language used by both central banks could be key for USD/JPY, which continues to hover around ¥144. Since the start of April the pair has been trading in a range from ¥140 to ¥148. But if the BoJ continues to signal a future of higher interest rates and further reductions in its bond holdings, while the Fed indicates that lower rates lie ahead, USD/JPY could resume the descent that began at the start of this year. 

In that scenario, the pair could break below the ¥140 level in the weeks ahead, which would represent a two-year low. If this month’s meetings confirm that the two central banks’ long-term policy outlooks have not changed, then the yen is likely to continue to strengthen against the dollar.

Economic and company events calendar

Major upcoming economic announcements and scheduled US and UK company reports include:

Monday 16 June

• China: May retail sales, May industrial production
• Italy: May consumer price index (CPI)
• Results: Digital Turbine (Q4), NextEnergy Solar Fund (FY), Peel Hunt (FY), Powerfleet (Q4)

Tuesday 17 June

• Japan: Bank of Japan interest rate decision, May imports, May exports
• US: May retail sales
• Results: Ashtead (FY), Jabil (Q3), Lennar (Q2)

Wednesday 18 June

• Eurozone: May harmonised CPI
• New Zealand: Q1 gross domestic product
• UK: May CPI
• US: Federal Reserve interest rate decision, weekly initial jobless claims
• Results: AO World (FY), Korn Ferry (Q4), Smith & Wesson (Q4)

Thursday 19 June

• Australia: May unemployment rate and employment change
• Japan: May CPI
• Switzerland: Swiss National Bank interest rate decision
• UK: Bank of England interest rate decision
• US: Markets closed (Juneteenth) 
• Results: XPS Pensions (FY)

Friday 20  June

• Canada: April retail sales
• China: People’s Bank of China interest rate decision
• Germany: May producer price index (PPI)
• UK: May retail sales
• Results: Accenture (Q3), Berkeley Group (FY), CarMax (Q1), Darden Restaurants (Q4), Kroger (Q1)

Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.

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