Quiet start to new week as markets shift focus to FOMC

Monday will start off very quietly as there are no economic data releases during the Asian session. In Europe, attention will be paid to Eurostat trade data for the EU.

In the US, industrial production data are released and investors will watch them in order to see whether the manufacturing sector has recovered from the downturn seen over the past two months.

On Tuesday the Reserve Bank of Australia’s monetary meeting minutes will be published. Then important data will be out during the European Session. Employment numbers are released for the euro area by Eurostat and the German Zew will also be closely watched. More attention will be paid to the UK inflation figures for May. In April, the UK slipped into deflation for the first time since data were first compiled in 1989. While further weak inflation numbers are expected in coming months, it is likely that actual deflation will be short-lived, largely a result of rising oil prices

Housing starts and building permit data are released in the US later on Tuesday

On Wednesday trade data are published in Japan.Then the Eurozone releases inflation figures. This final CPI report will provide ECB policy makers with more information on price trends in the region. Consumer prices rose at an annual rate of 0.3% in May according to flash data, in what is a strong turnaround from the 0.6% rate of decline seen at the start of the year.

Most of the market’s focus will be on the UK on Wednesday. The Bank of England publishes minutes from its latest monetary policy meeting, while unemployment and wages data are also out.
The Bank of England held interest rates steady at 0.5%. The minutes are likely to show that all nine Monetary Policy Committee members again voted to keep policy on hold, though the text will be gleaned for hawkish views as at least two members are likely to have seen the decision as finely balanced. The lack of action at the Bank does not come as a surprise. UK wage growth data, also updated on Wednesday, will therefore also be important in gauging the future path of UK interest rates, with past data having showed signs of pay picking up. There’s also a chance that the UK unemployment rate will fall to 5.4% from 5.5%, adding to signs of a tightening labour market.

The highlight of the week will be the Federal Open Market Committee meeting where it is due to announce its latest interest rate decision. No change is expected and it is likely that the Fed will wait until at least September before starting to raise interest rates. While labour market data have been strong recently, the FOMC will be watching the data flow closely in coming months to seek reassurance that the US economy is on track for recovery and has not lost too much momentum.

On Thursday the Swiss National Bank will announce their latest monetary policy decision. Ten focus will be on UK retail sales. Following from this, moving to the US, markets will look at US inflation numbers, current account data and initial jobless claims figures. Consumer price data for May are also updated. In April, prices were down 0.2% on a year ago, but core inflation remained at a five-month high of 1.8%. A further upturn in the core rate would add to pressure on policy makers to start hiking interest rates this year rather than delaying any tightening of policy into 2016. Meanwhile the Eurogroup meetings are being held on Thursday.

Finally on Friday, the Bank of Japan announces its latest monetary policy decision, followed by German producer price information and Eurozone current account data. Then Canadian inflation data are out. Meanwhile the EcoFin meeting will be held on Friday.

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