![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-26.png\")
<\/figure>\n\n\n\nGBP \u2013 GDP and employment data in focus<\/h2>\n\n\n\n
GBP seems to be about to end the week stronger against the USD, the EUR and is losing ground against JPY. We view the market\u2019s expectations for a hawkish BoE to be of the main driving factors behind GBP\u2019s strengthening. It\u2019s characteristic that Megan Greene, which is to join BoE\u2019s monetary policy committee (MPC), stated that rates may remain at higher levels than the pre-coronavirus period even if inflation starts falling. The statement tended to reinforce the view, that the replacement of former BoE MPC member Tenreyro, which tended to be more dovish, is leaning towards the hawkish side and thus may enhance the bank\u2019s aggressiveness in the face of a stubborn inflation. Currently, the markets expect the bank to deliver a 50 basis points rate hike in its early August meeting and continue to raise the interest rate until it hits 6.50% from the current 5.00%. For the time being BoE\u2019s monetary policy outlook and especially the differentials with other central banks seem to be providing support for the pound. Yet as we mentioned on various occasions, monetary policy tightening comes at a cost and it\u2019s characteristic that the growth rate of the UK economy remains at anemic levels. Hence we highlight in the coming week the release of the data for the UK employment market, which seems to be still holding out, while also the release of May\u2019s GDP and manufacturing output growth rates which is expected to be also closely watched.<\/p>\n\n\n\n JPY seems about to end the week in the greens against the USD, the EUR and the GBP, in a sign of broader strength. On a fundamental level, the warnings of Japanese officials, hinting towards a possible market intervention seem to have caused some nervousness to JPY bears. It\u2019s characteristic that Reuters reported that \u201cJapan’s top financial diplomat Masato Kanda said on Tuesday authorities were in close contact with U.S. Treasury Secretary Janet Yellen and other overseas officials “almost every day” on currencies and broader financial markets\u201d. The comments could be also viewed as some form of verbal market intervention as the Japanese Government supports JPY with statements, yet has not actually intervened in the markets buying Yens. We expect the issue to be maintained in the coming week albeit it would seem as if JPY found a footing to advance. On the other hand, there were no signs of BoJ altering its dovishness to a comma. Should BoJ\u2019s dovishness be expressed once again by policymakers or even intensify, we may see JPY weakening further as monetary policy differentials could weigh on JPY. On the other hand, JPY\u2019s role in the international markets as a safe haven may also be on display and Japanese currency could attract safe haven inflows should the market\u2019s worries for a possible recession in the US economy and\/or a global economic slowdown, intensify. On a macroeconomic level, the better-than-expected Tankan indexes for Q2, seem to show that the sentiment tends to improve for the outlook of the Japanese economy as it\u2019s recording a steady recovery.<\/p>\n\n\n\n EUR is about to end the week slightly lower against the USD, but also the JPY and GBP in a sign of a wider weakness. On a monetary level, some of ECB\u2019s policymakers seem to maintain their hawkish views, allowing for market expectations to intensify for possible rate hikes even after the summer. Germany\u2019s BuBa President and ECB policymaker Nagel verified at the beginning of the week his view that the bank had still a long way to go in raising interest rates, which tended to imply that a September rate hike is also quite possible. A scenario that the market seems to be increasingly pricing in. It should be noted though that economic activity is shrinking and that was also verified for the manufacturing sector in June, especially for Germany. At the same time we note that Germany\u2019s trade surplus narrowed implying that the largest economy in the Eurozone, benefitted less from its international trading activity. On the inflation front, we note that Eurozone\u2019s PPI rate showed that prices at a producer\u2019s level contracted once again, in May, yet at a less intense manner as in April. On the demand side of Eurozone\u2019s economy, we note that retail sales failed to grow in May, while the year on year growth rate even contracted, implying that the average consumer in Eurozone\u2019s economy may not be willing and\/or able to actually spend more, thus contributing less to its recovery. In the coming week, we note the release of the final HICP rates for June, yet given the lower number of high-impact financial releases stemming from the Eurozone, we expect fundamentals to be in the driver\u2019s seat for the common currency.<\/p>\n\n\n\n AUD\u2019s weakening against the USD, for a third week in a row seems to continue. On a macroeconomic level, we note that the weakening of AUD was maintained despite the Building approvals growth rate accelerating widely beyond expectations in May and Australia\u2019s trade surplus for May widening despite being expected to narrow. On a monetary level, we note that RBA during Tuesday\u2019s Asian session remained surprisingly on hold, despite market expectations for the bank to hike rates by 25 basis points. RBA cited that they need \u201csome time to assess the impact of the increase in interest rate\u201d. Yet, the bank noted that inflation still remains high and that some further tightening may be required in the future. On a more fundamental level, we note that Aussie traders tend to turn their attention towards China, given the close Sino-Australian economic ties. Hopes were raised on Thursday as US treasury Yellen traveled to China in an effort to improve the US-Sino relationships, a development that may have a positive impact on the Aussie as well, should it be successful. For the time being though worries about China\u2019s recovery tend to be extended, weighing on the Aussie, as the expansion of economic activity seems to be waning despite the Chinese government\u2019s efforts for the Chinese economy to recover. Furthermore, the deterioration of the market sentiment due to worries of possible overtightening of monetary policy in various developed countries tends to weigh on the Aussie as it is considered linked to the global economic recovery and a riskier financial instrument, as a commodity currency.<\/p>\n\n\n\n The CAD is about to end the week in the reds against the USD for a second week in a row, yet the US and Canadian employment data for June are still to be released and may alter that picture. On the monetary front in the coming week, we highlight the release of BoC\u2019s interest rate decision on Wednesday. The bank is expected to hike rates by 25 basis points next week yet the markets\u2019 expectations show tha the issue is not a closed case. It\u2019s characteristic that CAD OIS, currently imply a probability of 58.44% for such a scenario to materialize, while the rest implies that the bank may remain on hold at 41.56%. Despite the fact that BoC in its June meeting took the markets by surprise hiking rates while citing high inflationary pressures and the market\u2019s expectations, we see the case for the bank to remain on hold on Wednesday. The considerable slowdown of the headline and Core CPI rates for May could allow the bank to skip a rate hike in its coming meeting in order to get a more comprehensive understanding of what impact its cumulative monetary policy tightening may have had on the economy. Furthermore the fact that RBA remained on hold while the Fed also stood pat at their last meetings, may provide cover for the BoC as well. In such a case we may see the CAD slipping while a possible rate hike may provide support for the CAD if also the accompanying statement is hawkish. Loonie traders on the other hand should also keep a close eye on oil prices as a possible drop may weigh on the CAD as well.<\/p>\n\n\n\n As a closing comment, we expect the USD to maintain the initiative in the FX market over other currencies given that high-impact financial releases stemming from the US are expected. Also at this point, we would like to make a comment about New Zealand\u2019s RBNZ interest rate decision. After thirteen consecutive hikes and raising the cash rate by a total of 525 basis points the market seems to expect the bank to remain on hold Thursday and we tend to concur. Yet we may see the bank in its accompanying statement remaining on guard to fight inflationary pressures in New Zealand\u2019s economy, given that the CPI rate is still at very high levels. As for US equities markets, we note that the earnings season is about to begin and could shift some of the market\u2019s interest towards US stock markets. In the coming week, we highlight the release of Wells Fargo (#WFC), Citigroup (#C) and JP Morgan (#JPM) in a fresh sign about the health of US banks, yet we also point towards aluminium producer Alcoa Inc (#AA). Furthermore, we note that gold\u2019s price seems to be dropping for a third week in a row respecting the slight strengthening of the USD and given that the US yields were on the rise in the past few days. On the side, we note that, worryingly enough the US bond yield curve\u2019s inversion seems to be intensifying. Overall we expect the negative correlation of gold with the USD to be maintained in the coming week and highlight the release of the US CPI rates for June, especially given that gold is also used a hedging instrument against inflation.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-27.png\")
<\/figure>\n\n\n\nJPY \u2013 Weakening halted<\/h2>\n\n\n\n
<\/p>\n\n\n\n
EUR \u2013 Fundamentals to take over<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-28.png\")
<\/figure>\n\n\n\nAUD \u2013 China worries are intense<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-29.png\")
<\/figure>\n\n\n\nCAD \u2013 BoC\u2019s interest rate decision in the epicenter<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-30.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n