June’s PMI numbers from Europe all largely disappointed with composite numbers from France, Germany, and the EU as a collective came in lower than expected suggesting that the European economy is weakening. Whilst this may not have any immediate impact on the ECB rate hiking cycle, any further suggestion that the economy is slowing could well incite talk in the markets that perhaps the ECB may change from their current hawkish tone. Composite PMI numbers from the UK and US also came in lower, albeit to a lesser extent compared to the EU numbers.
Over the weekend, reports of a mutiny and an uprising that challenged Vladimir Putin’s rule in Russia took the headlines. The events in Russia had the potential to cause volatility in markets, but there is calm this morning as a reflection of the deal brokered by Belarus President Alexander Lukashenko that halted the Wagner mercenary group's advance towards Moscow.
Chancellor of the Exchequer, Jeremy Hunt, will be meeting industry leaders this week in an attempt to stamp out ‘greedflation’ by corporate profiteering, as the UK government look to support the Bank of England and the UK’s battle against inflation. Prime Minster Rishi Sunak also signalled on Sunday that he may reject recommendations by independent pay review bodies, and consider blocking pay rises in the public sector.
* Daily move - against G10 rates at 7:30am, 26.06.23
** Indicative rates - interbank rates at 7:30am, 26.06.23
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As mentioned above there is relative calm in the markets so far this morning. Focus today will fall on the German IFO survey to gauge outlook amongst businesses in Germany. The data is set to illustrate further deterioration in sentiment.
The annual ECB Forum is set to take place in Sintra, Portugal this week with a host of appearances from various members of the ECB, BoE, and the Fed. As ever we will be monitoring any comments with regards to future monetary policy.
For the UK this week final GDP numbers for the first quarter will be out on Friday. Inflation numbers from Australia, Canada, Europe will be the key data points for this week, as well as final US GDP numbers and the Fed's preferred measure of inflation, core PCE, on Friday.
Since February the composite PMI from Europe has undershot expectations, suggesting that the eurozone economy isn’t performing as well as many had expected, and June's numbers showed a very large deviation from what was expected. The ECB have continued their hawkish message on monetary policy recently, suggesting a rate hike in July and possibly September, but if there is continued underperformance in the economy perhaps we could start hearing suggestions of rate cuts?
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