Forex News and Events

The long awaited June FOMC meeting will be held on Tuesday and Wednesday, and will be followed by a press conference, held by Fed Chairwoman Janet Yellen, on June 17. Earlier this year, an accelerating US economy - Q4 2014 GDP printed at a solid 2.2%q/q annualised – led market participants to expect a first rate hike in June. Expectations have now shifted toward a September rate hike after a weak Q1 2015. At this week meeting, we anticipate that the Fed will reiterate its confidence in the economy as strong retail sales and upbeat job report reinforced market’s feeling that the US is on a much firmer footing and that the winter weakness was indeed temporary. In addition, we expect the Fed will repeat its commitment to start raising rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

However, we think that the recent lack of USD strength is not only due to the ongoing Greek situation, but also to the lack of persistently strong US data. Indeed, traders want solid evidences that the US is back on track before starting to reload long USD position. The CPI data due on Thursday will be closely monitored as a surprised on the upside would increase consistently the odds of a September rate hike.

Norges Bank: rate cut in sight (by Yann Quelenn)

Next Thursday, Norges Bank is likely to cut its main policy rate, currently at 1.25%, by 25bps. A month ago, Norges Bank kept its rates on hold. We assumed that policymakers’ officials were gaining time for gathering more data. Meanwhile, Manufacturing PMI, Industrial production decreased in May. Furthermore, the Q1 GDP growth figure came in at a disappointing 0.2% while prior GDP growth figure for Q4 2014 was 0.9%. As we expected the economy is still suffering from low oil prices and the likelihood for a cut rate has increased. Governor Olsen declared that as long as the Brent will stay below $70 a barrel the Norwegian economy will be at stake. For the time being, the oil surge has been temporary and oil prices remain clearly on the $60-level a barrel and therefore we anticipate Norges Bank to lower its rates by 0.25bps despite inflationary pressures that will add up to the housing price. Indeed, property prices increased tripled since the mid-1990s. A day before the Central Bank decision, the Norway’s Finance minister will hold a conference on strategy for housing market. The USDNOK will not rally up after the rates decision as the cut is already priced in.

Russian Central Bank to Cut 100bp (by Peter Rosenstreich)

The Russian central bank is meeting today and we and the market are expecting a 100bp cut to 11.50%. This cut continues the central banks dovish bias but at a slower pace than recent cuts of 150bp. In May, the CBR was in a panic to stave of unexpected RUB strength, utilizing aggressive rate cuts and heavy daily purchases of USD. But so far in June, the RUB has reverse direction allowing the CBR to be less concerned with the potential negative effects and even skipping days for FX interventions. The Russian economy remains in a weak state. Growths deceleration appears to have extended into Q2 with very few bright spots ahead. There is growing risk of a deeper recession as consumer demand has withdrawn illustrated by soft retail sales as wages decay endures. We suspect that the CRB would like to cut rates at a faster rate (to combat weak growth) but is constrained by elevated inflation levels and volatility in RUB. Last year’s collapse of the RUB has made the CBR extremely attentive to actions that could unsettle the markets. We remain bearish on the RUB as the currency faces significant challenges. Western sanctions, low oil prices, unstable inflation environment and Fed rate hikes (reversing investors’ appetite for Russian investment) will all weigh on the RUB.

Silver - Challenging the Support at 15.82

Forex News

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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