June’s highlights so far include two major central banks taking in monetary policy decisions. The US Federal Reserve raised interest rates by 25 basis points, while the European Central Bank announced a modest drop to 15 billion euros from September, and eventually ending its quantitative easing program by December 2018.
The US Dollar continued to maintain strong gains from the previous month. The gains were supported by a better economic outlook and tightening monetary policy. In the currency markets, the greenback saw strong gains, and the biggest decline against the US dollar came from gold, which fell by 3.51% during the month, while the Norwegian Krone gained 0.47% against the US dollar.
Outlook for next month: July 2018
July is expected to keep manly calm, especially as most major central banks are already raising prices or setting expectations for future monetary policy decisions. Amidst all this, the ECB is expected to remain on the sidelines. The Fed will not hold any monetary policy meeting this week after it raised interest rates in the previous month. The Bank of Japan monetary policy meeting may also be set on the sidelines, but given the recent weak pace of inflation this could change.
July will see the beginning of the third quarter, and the following is a quick look at the major events we are looking forward to this month:
Bank of Canada – to raise interest rates or not
The Bank of Canada will meet in July of a decision-making monetary policy. While interest rates have remained steady over the past few months, this may change as markets shrink over whether the Bank of Canada will raise interest rates.
At a recent monetary policy meeting in May, policymakers at the Bank of Canada indicated that rates would soon begin to rise. While this initially sent out the possibility of raising the interest rate in July from the Bank of Canada Central Bank, investors were disappointed by the recent economic data. Retail sales fell while inflation remained flat. Consumer prices rose even though they were above the 2.0% inflation rate at Bank of Canada, which rose modestly.
This disappointing data prompted investors to quickly cut their bet on a rate hike in July.
However, markets are allocating a 50% probability of a rate increase in July. This is based on upcoming jobs data as the Canadian economy has been steadily abandoning jobs, and further disappointment in the labor market will boost expectations of a BoE rate hike in July. More comes from the fact that the trade uncertainty brought by the US administration is also expected to affect decision-making. With the looming trade uncertainty expected to hit Canadian exporters, officials are likely to ask for more time before continuing to raise interest rates.
The markets are waiting for second quarter data
July will be the release of initial GDP reports in many G7 economies, which also include the United Kingdom and the United States. With the Q1 GDP report showing that most developed economies are moderately moderate, the outlook is going to rise next month.
In the last week of July, US second quarter GDP reports will be released. With the US economy recording a 2.3% rise in the first quarter and the UK economy growing 0.1%, investors will closely watch any rebound in the relevant economies.
Euro zone GDP figures will also be released this month, and we are expected to see whether the economies concerned, especially the Eurozone and the UK, have recovered from the weak gains recorded in the first quarter.
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