How have interest rate expectations changed after this week’s events?ECB policymaker Wunsch says upside surprises in inflation would justify further tighteningECB policymaker Lane sees the current inflation shock as “mid-sized”, defends rate hikeUSD/JPY is near the highest level since 1986 as divergence with the Fed intensifiesUK May retail sales +1.2% vs +0.5% m/m expectedFX option expiries for 19 June 10am New York cutWhat are the main events for today?
It’s been a very light session with no major data or news releases. The markets were also pretty calm with things expected to die down further during the NA session due to the US holiday. As a reminder, the US stock market and bond market will be closed and will resume trading on Monday. Futures markets typically halt or experience early closures, often closing at 12:00 p.m. ET.
The only economic data we got was the UK Retail Sales report. The data surprised to the upside across the board but the market reaction was pretty much muted as it doesn’t change anything for the BoE.
ECB policymakers Lane and Wunsch defended last week’s rate hike decision arguing that the ECB had not made a mistake by hiking while inflation was rising and uncertainty remained elevated. Wunsch, in particular, acknowledged that easing geopolitical tensions involving Iran and moderating wage growth could strengthen the argument that the ECB might have been able to look through the energy-driven inflation spike. Still, he maintained that last week’s decision was justified given the information available at the time.
In the American session, there’s just the Canadian Retail Sales report which is not going to change anything for the BoC, so the market reaction will likely be muted.
Have a great weekend!
This article was written by Giuseppe Dellamotta at investinglive.com.