June 10, 2024

“All eyes will be on the US this week as we await the release of CPI data and the FOMC monetary policy announcement on Wednesday. Forecasts suggest a 0.1% month-over-month decrease in CPI from 0.3%, while the year-over-year CPI is expected to remain steady at 3.4%.”

Tim Hallinan – Trading Director

Main Headlines

This week, the focus will be on the US with the release of the CPI data and the FOMC monetary policy announcement on Wednesday. These events could significantly impact the market. Expectations point to a 0.1% month-over-month CPI, a decrease from 0.3%, while the year-over-year CPI is forecasted to hold steady at 3.4%. Excluding food and energy, the m/m CPI is anticipated to rise by 0.3%, with the y/y CPI expected to be 3.5%, slightly down from 3.6%. Overall, US CPI is expected to decline gradually, with a small decrease in core goods prices predicted. Following stronger-than-expected jobs data, the Fed is expected to maintain the federal funds rate at 5.25-5.5%.

In the UK, the main news will be the release of the claimant count change, the average earnings index, and the unemployment rate, providing insights into the labour market and wage trends. The consensus for the claimant count change is an increase from 8.9K to 10.2K. The average earnings index is likely to remain at 5.7%, and the unemployment rate is expected to stay at 4.3%. Overall, the UK jobs market data points to a cooling trend. The MCP will closely examine the impact of the 10% increase in the National Living Wage. Analysts expect this rise to have boosted private sector regular pay by 1.1% month-over-month, higher than the MPC’s forecast, but anticipate the MPC to remain cautious.

GBP

Sterling is stronger against euro and weaker against the dollar this morning. The UK’s financial watchdog is poised to approve the most extensive overhaul of the country’s listing regime in 40 years, potentially as early as this month. The FCA’s board will convene on June 27 to determine the final rules aimed at revitalising London’s stock market. The changes will come into effect after a two-week implementation period once confirmed. It is likely that the FCA will delay announcing the changes until after the July 4 election, with some anticipating the rules to be revealed in mid-July.

EUR

Euro is weaker than most major currencies in the early morning trade. The currency fell sharply this morning due to political uncertainty after French President Emmanuel Macron called a snap legislative election. Macron stunned France on Sunday by announcing the elections after his centrist alliance suffered a major defeat to Marine Le Pen’s far-right movement in the European parliamentary vote. Preliminary results showed Le Pen’s Rassemblement National (RN) secured 31.5% of the vote, while Macron’s alliance received 14.5%, a significant blow to the president. Macron narrowly avoided a third-place finish, with the centre-left taking 14% of the vote.

USD

The dollar is well bid against most major currencies this morning. Increasing political pressure is complicating interest rate decisions in the US, as central banks weigh whether to adjust borrowing costs amidst upcoming elections. The Federal Reserve is wary of any perception that rate cuts might be politically motivated to favour incumbent governments. The labour market saw an unexpected surge of 272,000 jobs in May, surpassing forecasts and prompting a revaluation of expectations regarding Federal Reserve rate cuts. Figures from the Bureau of Labor Statistics revealed a significant increase in non-farm payrolls, exceeding the 180,000 rise anticipated by economists.

Markets

The euro fell to its lowest in a month after French President Emmanuel Macron called a snap vote in the wake of European Parliament elections. Asian currencies declined on the heels of a strong US jobs report from Friday. The common currency dropped as much as 0.5%, retreating alongside European equity futures and French bonds. Gains for the far-right in the European Union-wide vote, in line with expectations, led Macron to call a snap legislative ballot for his country in a bid to stop the rise of his rival Marine Le Pen.

Main Economic Events (All Times CET)

8:00 a.m.: Denmark, Norway May CPIs
9:00 a.m.: Turkey April Industrial Production
11:30 a.m.: ECB’s Nagel speaks
1:00 p.m.: ECB’s Holzmann speaks
BRICS foreign ministers meeting through June 11
Markets shut in China, Hong Kong, Taiwan and Australia

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