![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-43.png\")
<\/figure>\n\n\n\nGBP \u2013 UK\u2019s trade deal with the US<\/h2>\n\n\n\n
The pound seems about to end the week higher against the USD, JPY and EUR in sign of wider strength. On a fundamental level, we note the UK\u2019s Government to strike a trade deal with the US. During Brexit, the possibility of a big, fat free-trade deal between the UK and the US, was considered as the main prize that would counter the negative effects of Brexit. Yet such a US-UK trade deal seems to be off the calendars for the short to medium term, as UK Prime Minister Sunak, while on his way to visit the US about the issue admitted that such a trade deal is not a priority. For the time being the aim seems to be a trade deal regarding a narrow spoke of products such as critical minerals and\/or in the digital sector. Also, we note the UK Government\u2019s efforts to enhance the country\u2019s leading role in Artificial intelligence as it prepares to host the first summit about the issue. Overall though we still see Brexit weighing on a fundamental level on the UK economy. On the monetary front, it seems that the market\u2019s expectations for another rate hike in the bank\u2019s next meeting are very high and that may keep the pound supported on a monetary level. On a macroeconomic level, we note that the Halifax House prices erased the contraction noted in April by reaching stagnation levels in May, yet we still see the tightening of BoE\u2019s monetary policy as weighing on the UK real estate sector. We highlight next week\u2019s financial releases that may enhance the interest of pound traders especially the release of April\u2019s employment data and April\u2019s GDP rates.<\/p>\n\n\n\n JPY seems to have little changed against the USD, yet is losing ground against the EUR and GBP for the week. For the Yen in the coming week, BoJ\u2019s interest rate decision on Friday seems to stand apart. The market expects the bank to remain on hold at -0.10% and JPY OIS seems to imply an 89% probability for such a scenario to materialize. We would like to note BoJ Governor Ueda\u2019s statements on Wednesday that \u201cWhen achievement of our price target is foreseen, we will debate specifics (of an exit policy) at our policy meeting and disclose the information,\u201d which tended to weigh on the dovish side once again underscoring the bank\u2019s intentions to keep its ultra-loose monetary policy settings unchanged. We expect the bank to maintain its usual dovish tone in the coming meeting as well and should that be the case we may see JPY slipping. On a more fundamental level, we still highlight JPY\u2019s dual nature as a safe haven and a national currency and should we see the markets\u2019 risk aversion being on the rise in the coming week, we may see JPY getting some support. On a macroeconomic level, we note the wide contraction of the All household spending growth rate for April, implying a weakness in the demand side of the Japanese economy. Nevertheless, there seems to be an improvement given the wide acceleration for Q1\u2019s GDP rate on a year on year level which implied a wider expansion of the Japanese economy than anticipated, which may allow for some optimism and in turn may provide some support for JPY.<\/p>\n\n\n\n EUR seems about to edge higher for the week against the USD and JPY but not the pound. EUR traders are expected to focus on ECB\u2019s interest rate decision next Thursday, as the bank is expected to hike rates by 25 basis points. For the time being EUR OIS seem to imply that the market has almost fully priced in such a scenario, as they imply a 96.64% probability for such a scenario to materialize. We note that the market seems to expect another 25 basis points rate hike in ECB\u2019s July meeting, before pausing its rate hiking path. Hence for the EUR to get some support from the release, the bank may have to deliver the rate hike expected, yet also hint towards another rate hike probably by maintaining a hawkish tone in its accompanying statement and during ECB President Christine Lagarde\u2019s press conference later on. Should there be any signs of hesitation we may see the common currency weakening. It should be noted though that the preliminary release of the Eurozone\u2019s HICP rate for May showed a substantial slowdown which may ease the pressure on the bank, to actually proceed with another rate hike in its July meeting. On a macroeconomic level we note the widening of Germany\u2019s trade surplus for April and the acceleration of the industrial output growth rate for the same month, yet for the Eurozone as a whole, the situation still seems dire as the Sentix index dropped deeper into the negatives implying an even wider pessimism for the area.<\/p>\n\n\n\n AUD is about to end the week stronger against the USD for the second week in a row. RBA\u2019s interest rate decision on Tuesday may have been a key factor behind AUD\u2019 strengthening as the bank took the markets by surprise by delivering a 25 basis points rate hike. RBA Governor Lowe, in his statement, mentioned that \u201cInflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range\u201d while in his forward guidance stated that \u201cSome further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe\u201d. The forward guidance tends to foreshadow more rate hikes to come, which was an additional element supporting the Aussie. On a macroeconomic level, we highlight the slowdown of the GDP rate for Q1, implying that the Australian economy expanded to a lesser extent than expected. We highlight Australia\u2019s employment data for May next Thursday as the Aussie\u2019s next big test on a macroeconomic level. On a more fundamental level we remain worried about the renewed tensions in the US-Sino relationships that may weigh on AUD should they escalate further. Furthermore, China\u2019s trade data for May were disappointing as both the import and export growth rates contracted and the trade surplus was slashed by almost a third, intensifying market worries for China\u2019s economic rebound and possibly for a contraction of Australian exports of raw material to the Chinese mainland.<\/p>\n\n\n\n The Loonie is about to end the second week stronger against the USD, yet Canada\u2019s employment data for May are still to be released and could alter its direction. Nevertheless, BoC\u2019s surprise 25 basis points rate hike on Wednesday provided some support for the CAD. The bank in its accompanying statement noted the tick-up of inflation for April yet still expects the CPI rates to ease to around 3% in the summer. Furthermore, the comments made by the bank that \u201cconcerns have increased that CPI inflation could get stuck materially above the 2% target\u201d feeding market expectations for another 25 basis points rate hike in the bank\u2019s July meeting. On a more fundamental level, we note the wildfires in Quebec and Ottawa, with more than 9.3 million acres “charred,”. The situation besides the environmental catastrophe may also have an adverse effect on the Canadian economy. Also on a fundamental level, we note that oil prices seem to be little changed thus failing to have a material effect on the Loonie in either direction. Market worries about the demand side of the commodity seem to have countered Saudi Arabia\u2019s pledge for the cut of oil production levels, currently. Yet the tightening of the US oil market, should it continue in the coming week, may provide some support for oil\u2019s price thus also supporting the Loonie. On a macroeconomic level, we expect it to be rather slow for CAD traders, given the low number of high-impact financial releases stemming from Canada, thus fundamentals may be in the forefront.<\/p>\n\n\n\n In the coming week, we expect the USD to get more of the initiative in the FX market over other currencies and lead the way, given that the number of high-impact financial releases stemming from the US, is to be increased. Staying in the FX market the Turkish Lira was considered to be in free-fall mode, reaching all-time low levels, as USD\/TRY reached 23.4 and as state officials allegedly stated they will halt dollar sales in order to defend it. Recep Tayyip Erdo\u011fan’s unorthodox economic policies leave the TRY negatively predisposed for further deterioration and should no intervention take place we may see the devaluation rate accelerate even further. On Wednesday USDTRY soared by more than 7% intraday, with no slowdown in sight and Goldman Sachs FX market strategists foresee the Lira closing at the 28 level against the USD within the next year. Despite a relative stabilisation on Thursday, the bearish sentiment seems to be still present for the Lira though and on a macro level, we note that Turkey\u2019s Net FX reserves are still in the negatives. On the other hand, the Turkish Government seems to be placing in key positions such as the Finance Minister and head of the Turkish Central Bank, persons of more orthodox economic orientation in an effort to convince the markets of a normalization. US stock markets continue to send out mixed signals, implying rather undecisive markets, with Nasdaq edging lower as the index corrects amidst the market\u2019s acute interest in Artificial Intelligence. As for gold, we note the gains made for the week, possibly as a result of its negative correlation with the USD. We expect the negative correlation of the two instruments to continue leading gold\u2019s price in the coming week and also expect some increase in volatility, as US high-impact financial releases are to multiply.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-44.png\")
<\/figure>\n\n\n\nJPY \u2013 BoJ\u2019s interest rate decision in focus<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-45.png\")
<\/figure>\n\n\n\nEUR \u2013 ECB expected to hike rates<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-46.png\")
<\/figure>\n\n\n\nAUD \u2013 RBA took the markets by surprise<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-47.png\")
<\/figure>\n\n\n\nCAD \u2013 BoC also hiked rates<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/06\/image-48.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n