The Week ahead – BoE and SNB set to hike, RBA minutes and Jerome’s jawboning.

More Central bank action is set to dominate the news flow this week with the FOMC and ECB decisions done, coming up we have the Bank of England and the Swiss National bank with monetary policy meetings, sprinkled with a slew of Fed speakers which should keep markets interesting.

US – Dollar Index holding critical support.

US markets will get off to a quiet start, with the markets closed on Monday due to a public holiday. After last week’s fireworks with the FOMC deciding on a “hawkish” pause (Though Chair Powell did water that down with a “dovish” presser) this week will be all about the Fed speak for traders trying to gauge what’s next from the Fed. Fed members Bullard, Mester , Barkin and Goolsbee are all slated for appearance this week but it will be Thursdays appearance of Powell before the Senate Banking Panel which I suspect will draw the most interest. Currently markets seem to be convinced that last weeks FOMC decision was a skip, not an end to the Feds tightening cycle, so Powell’s comments will be closely watched by USD traders with the Dollar Index finding some minor support at 102 after its worst week since January, holding this level will hinge on the tone of the Fed speakers this week.

UK – Bank of England set to hike – will they push back against the market’s hawkishness?

After some hot inflation and wage data, markets are now expecting the Bank of England to take rates close to 6% over the coming months from the current 4.50% (Another six 25 bp hikes!) The question traders will be taking into Thursday’s BoE meeting (Where a 25bp hike is fully priced in and then some) is whether the Bank will push back against this extremely hawkish pricing or not which will have a material effect on the GBP in the short term. The GBP rallied strongly last week, blasting through all previous resistance to hit 14-month highs on the back of this hawkish pricing, so whether this rally has legs left or not will depend greatly on the BoE’s comments accompanying the rate decision.

Switzerland – SNB rate hike 25 or 50?

The SNB is also set to release their latest monetary policy on Thursday where a hike of 25bp is fully priced in with a 50-50 shot at a supersized 50bp hike. Inflation in Switzerland is fairly benign by international standards at 2.2%, but it is still above the SNB target band of 0 – 2.0%, that, combined with hawkish rhetoric seen recently out of SNB members and the Swiss coming from a low base (official rate is only 1.50% currently) has seen markets re-price to the hawkish side for this decision, a 50bp hike would likely see the CHF reverse some of it’s recent weakness, either way the usually boring CHF will be one to watch over this decision with some key technical levels in the EURCHF in play.

Australia – RBA minutes

After another “surprise” rate hike against market expectations, trading desks will be poring over the RBA minutes released on Tuesday for more colour regarding that decision. Rates markets are pricing in a 53% of a 25bp hike at the next RBA meeting, I would expect these odds to fluctuate significantly between then and now, Tuesdays minutes will certainly play a part in that and have repercussions for the AUD which has so far had a record start to June with AUDUSD rallying 6% so far this month, crashing through the major resistance at 0.6800, the question is will this level flip to support now?

The weeks calendar of major news below: