By Dow Jones Newswires staff


Below are the most important global events likely to affect FX and bond markets in the week starting June 15.

A raft of interest rate decisions from central banks including the Federal Reserve and Bank of England are in focus in the week ahead.

The Fed and BOE are both widely expected to leave interest rates unchanged but the focus is on whether they will leave the door open to the possibility of raising rates later this year. The Riksbank, Norges Bank and Swiss National Bank are also set to announce their decisions.

In Asia, investors are looking ahead to a slate of central-bank decisions in Japan, Australia and Indonesia as the prolonged Middle East conflict weighs on the economic outlook and adds pressure on regional currencies. Trade data from New Zealand, Malaysia and Singapore will offer further clues on how higher energy prices are shaping the global economy.


U.S.


The Federal Reserve announces its interest rate decision on Wednesday where the focus is on any guidance from new Fed Chair Kevin Warsh. Market pricing on LSEG implies little prospect of the Fed raising rates Wednesday. However, markets have recently increased odds of a move later this year in response to recent robust labor market reports, resilient U.S. economic activity data and the energy price shock stemming from the Middle East conflict.

The latest data on consumer prices showed annual inflation rose to 4.2% in May but the core measure eased by more than forecast to 0.2% month-on-month. Hotter headline inflation is an unwelcome handoff as the new Fed Chair takes the wheel, Fitch Ratings head of U.S. economics Olu Sonola said in a note. "But this is not yet a panic-hike story." Core inflation remains relatively contained, giving the Fed room to keep rates on hold for a while longer, he said.

Economic data include industrial production and the Empire State manufacturing survey on Monday, followed by new housing starts on Tuesday, retail sales and pending home sales on Wednesday and weekly jobless claims on Thursday.

On Friday is the Juneteenth public holiday and the stock and bond markets will be closed.

The Treasury will auction 20-year bonds on Tuesday and five-year inflation-protected TIPS on Thursday.


Eurozone


The European Central Bank's 25-basis-point tightening on Thursday, its first interest-rate hike since 2023, is followed by a week light in data. The ECB raised the key deposit rate to 2.25% in a widely-anticipated move, pointing to the challenges major economies are facing from higher oil prices caused by the closure of the Strait of Hormuz.

The ECB raised its inflation forecasts and cut the growth projections. Analysts believe the ECB will likely deliver another interest-rate hike, possibly in September, when a new set of staff forecast is available.

"ECB President Lagarde struck a moderately 'hawkish' tone at the latest meeting," DZ Bank analyst Christian Reicherter said in a note. "This generally suggests that the recent rate hike is likely to be followed by another," the analyst said.

However, DZ Bank doesn't anticipate the start of a comprehensive rate-hiking cycle.

"We do not expect the next hike in July, but rather after the summer break in September."

Eurozone industrial production data for April are due Monday, followed by final eurozone harmonized CPI data for May on Wednesday. The German ZEW economic sentiment index is due on Tuesday.

Slovakia will hold a bond auction on Monday, while Spain and France will hold auctions on Thursday. Germany will sell April 2031 Bobl on Tuesday and 2047- and 2053-dated Bunds on Wednesday.


U.K.


The Bank of England's monetary policy decision on Thursday is the U.K.'s main event. The BOE is widely expected to keep interest rates unchanged at 3.75%, although they could signal willingness to raise rates at future meetings if energy prices stay high for an extended period, Oxford Economics' Edward Allenby said in a note.

The special election in the Makerfield constituency on Thursday is also expected to dominate U.K. markets next week. One of the candidates in the election, Andy Burnham, has said he would enter any Labour leadership contest if he wins, keeping alive the question about Prime Minister Keir Starmer's future.

"Andy Burnham is extremely likely to become the next prime minister if he wins the Makerfield by-election," Pantheon Macroeconomics' Rob Wood and Elliott Jordan-Doak said in a note.

Investors will closely watch the U.K. inflation data and jobs data due to be released on Wednesday and Thursday, respectively, to gain clues on the potential future direction of the BOE rates.

Other economic data set to be released next week include Rightmove house price index data on Monday, and U.K. consumer confidence survey data, public sector finances data, and U.K. retail sales data on Friday.

The U.K. will sell gilts maturing in July 2036 on Tuesday.


Scandinavia


The Riksbank's interest rate decision will be announced on Wednesday where markets are nearly fully pricing in rates being held steady at 1.75%, according to LSEG data. "The bank remains in wait-and-see mode, as soft underlying inflation allows policymakers time to assess the effects of the Iran war on the economy," Nomura analysts said in a note. However, the longer the Strait of Hormuz remains closed, the more likely the Riksbank will respond by raising rates, they said. The Riksbank's new guidance and updated policy rate projections could indicate the increased probability of a rate rise before year-end while highlighting elevated uncertainties, they said. Nomura, however, doesn't expect a rate rise until the end of 2027 due to soft underlying inflation and a fragile economic recovery.

Swedish labor market data are also due on Monday.

In Norway, the Norges Bank will follow the Riksbank with its decision on Thursday. Norway's central bank is expected to leave rates at 4.25% after delivering a surprise 25 basis points rate rise in May.

"Underlying inflation remains sticky, but inflation is not sufficiently high to warrant back-to-back rate rises," Nomura analysts said. However, the Norges Bank could signal a rate rise later this year given the Strait of Hormuz remains closed and underlying inflation accelerated in May, they said. Nomura expects a 25bps rate rise in September.

Denmark and Sweden will hold bond auctions on Wednesday.


Switzerland


The Swiss National Bank is expected to leave interest rates at 0% when it announces its policy decision on Thursday. The SNB has some breathing space as inflation is comfortably within its target range of 0-2%, having remained stable at 0.6% year-on-year in May, Nomura analysts said in a note. The franc's strength over the past several months is likely exerting downward price pressure on some goods imports, counteracting the effects of higher energy prices, they said.

"A key question is whether the SNB will repeat its wording from the last meeting that its 'willingness to intervene in the foreign exchange market has increased' as opposed to the more typical statement that it 'remains willing to be active in the foreign exchange market as necessary'."


Czech Republic


The Czech National Bank's next policy decision is on Thursday. The CNB will likely raise rates in a split vote, ING analysts said in a note. The economy doesn't appear ready for tighter monetary policy but CNB policymakers have hinted that a rate rise is more likely than unchanged rates, they said. "Governor Ales Michl has become rather vocal about the need for tighter monetary policy, suggesting that he is willing to raise interest rates even though this could weigh on economic growth."


Latin America


Brazil's central bank will deliver its interest rate decision on Wednesday. The market prices a 66% chance that interest rates will be held at 14.5% and a 34% probability of another 25 basis points rate cut, according to LSEG data. The central bank, or Copom, cut rates for the second straight month in April as growth slowed and the economy faced inflation headwinds from the Middle East conflict. It indicated that future rate decisions were unclear and caution is needed given uncertainty over the impact of the conflict.


Japan


The Bank of Japan is scheduled to hold a two-day monetary-policy meeting starting Monday. While Gov. Kazuo Ueda has been hospitalized and is expected to miss the meeting, he will continue to perform his duties remotely as needed, the BOJ said. Ueda is expected to remain in the hospital for about two weeks while receiving treatment for an infected liver cyst, the central bank said.

Deputy Gov. Ryozo Himino will serve as acting chairman for the upcoming meeting, while Deputy Gov. Shinichi Uchida will conduct the post-meeting press conference, according to the central bank.

While Gov. Ueda won't be able to vote in his absence, he will provide his views in writing, according to the central bank. "If the vote were to end in a tie, Deputy Governor Himino, acting as chair, would make the deciding call--but his decision would not diverge from Governor Ueda's intentions," JPMorgan's Ayako Fujita said.

The impact of Ueda's absence on the BOJ's expected policy decisions is likely to be limited, Fujita said. "The direction toward a rate hike already appears to be widely shared among board members, making a sharp split in votes unlikely," the economist added.

The Bank of Japan is also scheduled to conduct outright purchases across four sectors of the Japanese government bond market on Thursday. These include bonds with maturities of more than one year and up to three years, more than five years and up to 10 years, and more than 10 years and up to 25 years. The planned purchases are likely to provide support to Japan's bond market.

Trade data and consumer-price index figures for May are also scheduled for release on Wednesday and Friday, respectively.


China


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06-14-26 2014ET