Tuesday June 20:
At the beginning of the week, there was a lack of significant economic events, and the US markets were closed in observance of the Juneteenth Holiday. The US Dollar recovered some of its previous week’s losses but still faces challenges.
Over the weekend, United States Secretary of State Antony Blinken met with Chinese President Xi Jinping, and on Monday, they reported “good progress” in talks aimed at stabilizing the relationship between the two countries. However, no major breakthrough was achieved.
Philip R. Lane, a member of the Executive Board of the European Central Bank (ECB), stated on Monday that another interest rate hike in July appears appropriate, with the decision in September dependent on data. Lane expressed confidence that inflation would decrease to the central bank’s 2% target fairly quickly. In contrast, another ECB Executive Board member, Isabel Schnabel, voiced concerns about the central bank underestimating inflation and suggested that the interest rate path should have been steeper. The EUR/USD currency pair closed the day around 1.0920.
The GBP/USD currency pair remains near 1.2780, not far from last week’s high of 1.2848. Investors anticipate that the Bank of England (BoE) will raise its benchmark interest rate by 25 basis points later in the week while keeping the possibility of additional hikes open. UK interest rate swaps indicate a higher than 50% likelihood of BoE rates reaching a terminal rate of 6% by February 2024.
The Reserve Bank of Australia (RBA) will release the minutes of its latest meeting early on Tuesday. In a surprising move, Australian policymakers raised the cash rate by 25 basis points for the second consecutive month, citing “excessively high” inflation in the services sector. The minutes are expected to confirm the policymakers’ hawkish stance, with investors seeking hints about a potential terminal rate. The People’s Bank of China (PBoC) will announce its interest rate decision. The AUD/USD currency pair is trading around 0.6850 ahead of these events.
Gold (XAU/USD) remains stable around $1,950 per troy ounce, while the USD/JPY currency pair exerts pressure around the 142.00 region.
