![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-58.png\")
<\/figure>\n\n\n\nGBP \u2013 Focus on CPI rates<\/h2>\n\n\n\n
The pound seems about to end the week stronger against the USD yet is losing ground against the EUR and JPY. Nevertheless, pound traders seem to remain confident possibly also due to the results of the stress tests conducted by BoE regarding the financial stability of the UK. The results showed that UK lenders were well capitalized to go through a possible economic crisis , a scenario that allows practically BoE to maintain its hawkish approach and proceed with more rate hikes in the months to come. Comments by BoE Governor Bailey earlier this week tended to highlight how sticky inflation seems to be in the UK economy, at least stickier than other developed rich economies, yet also stated that expects inflation to come down \u201cmarkedly\u201d over the next few months. On a macroeconomic level, we note a crack in the tightness of the UK employment market for May as the unemployment rate rose to 4.0% and the employment change figure dropped to 102k. Yet the average earnings growth rate accelerated implying that the UK employment market continued to support inflationary pressures in the UK economy. On the other hand the GDP and manufacturing output growth rates contracted and given BoE\u2019s hawkish intentions our worries for the outlook of the UK economy tend to enhance. Hence we highlight in the coming week the release of the CPI rates for June as well as the retail sales growth rate that may provide a deeper insight to the consumption side of the UK economy.<\/p>\n\n\n\n JPY seems about to end the week in the greens against the USD, the EUR and the GBP for a second week in a row in a sign of continued broader strength. On the monetary front, BoJ seems set to keep its ultra-loose monetary policy settings in place for now. It\u2019s characteristic that BoJ Deputy Governor Uchida was reported stating that he does not anticipate rate hikes in the near future. Yet market expectations for some form of monetary policy The common currency is about to end the week higher against the USD, and GBP yet seems to be losing ground against the JPY. On a macroeconomic level, we highlight our worries for the outlook of the Eurozone. It\u2019s characteristic that Germany\u2019s ZEW indicators for July were worse than expected, implying a more pessimistic outlook and deteriorating conditions on the ground for the largest economy of the area. But also the slowdown of Eurozone\u2019s industrial output growth rate for May was not a good sign. On the other hand, the slowdown of France\u2019s HICP rates for June and the acceleration of Germany\u2019s respective HICP rates was confirmed sending some mixed signals. On the monetary front, the ECB\u2019s hawkish intentions are still present and the market prices-in another rate hike in its July meeting and another one in September. For the time being we note that ECB Governing Council member De Galhau was reported stating that the ECB is nearly finished raising interest rates but will keep them at a \u201ca high plateau, on which we will have to remain for a sufficiently long time to fully transmit all the effects of monetary policy.\u201d. Furthermore, Bank of Portugal Governor Mario Centeno stated that \u201cInflation is coming down faster than the way up,\u201d. Overall the comments tend to ease market worries for the bank\u2019s hawkish intentions and should they ease further they may weigh on the common currency. Yet we tend to remain a bit worried for Germany\u2019s sticky inflation as it may force Germany\u2019s Bundes Bank to maintain a hawkish stance.<\/p>\n\n\n\n The Aussie repeated last week\u2019s rise against the USD in another steep upward movement. On a more fundamental level, we note that the improvement of the market sentiment tended to help the commodity currency AUD, as it is considered to be more risky. Furthermore, we tend to maintain our worries for the recovery of the Chinese economy. We would note the release of China\u2019s trade data for June. The worrying part is that Chinese exports contracted even further, yet the trade surplus was allowed to rise as imports also fell. Nevertheless, the news imply lower economic activity for China\u2019s economy, which could be stressed even further, yet we expect a bottoming out near the end of the year. For the time being, given the close Sino-Australian economic ties, any indication that the Chinese economic recovery is slowing, may have an adverse effect on AUD. On a monetary policy level, we note for next week the release of RBA\u2019s July meeting minutes which may shed more light in regards to the bank\u2019s intentions. For the time being the market seems to expect another rate hike after a pause in the August meeting. We should also note that RBA Governor Lowe announced that the bank is to cut the number of meetings from next year onwards. It still remains to be seen if Mr. Lowe is to be replaced by someone else at the head of the bank.<\/p>\n\n\n\n The CAD is about to end the week in the greens against the USD, almost fully reversing the losses of the prior two weeks. On the monetary front, we highlight BoC\u2019s interest rate decision on Wednesday. The bank as was expected hiked rates by 25 basis points. Furthermore, in its accompanying statement the bank stated that \u201caccumulation of evidence that excess demand and elevated core inflation are both proving more persistent\u201d and cited it as a reason for the rate hike. It also stated that it will continue to \u201cassess the dynamics of core inflation and the outlook for CPI inflation\u201d in its decision-making process for more rate hikes. It was also characteristic that BoC Governor Macklem verified the stubbornness of underlying inflationary pressures in the Canadian economy in the opening statement of his press conference. That\u2019s why we highlight the release of Canada\u2019s CPI rates for June on Tuesday. On a macro-economic level, we note that Canada\u2019s employment data tended to show a relatively tight employment market, despite the rise of the unemployment rate to 5.4%, as the employment change figure shot up to 59.9k, providing some support for the Loonie. Furthermore, we also note the acceleration of May\u2019s building permits growth rate, despite the overall tightening of BoC\u2019s monetary policy. On a more fundamental level, we also highlight the positive effect a possible additional rise of oil prices may have on the CAD in the coming week, given that Canada is a major oil-producing country.<\/p>\n\n\n\n As a closing comment, we expect the USD to relent some of the initiative to other currencies in the FX market, given that the number of high-impact financial releases is to be reduced. Overall we expect volatility to ease in the FX market given also that part of the market\u2019s attention is to be shifted towards stock-markets as the earnings season comes into full swing. For the coming week we note among many companies, the release of the earnings reports of Morgan Stanley and Lockheed Martin on Tuesday, IBM, Goldman Sachs, Tesla and Netflix on Wednesday, Johnson and Johnson on Thursday and AT&T and American Express on Friday. Furthermore, we would like to also make a comment about the interest rate decision of the Turkish Central Bank due out on Thursday. We remind you that the bank had hiked rates in its last meeting, raising them to 15%, yet failed to reach market expectations. The decision triggered another round of weakening for the TRY which had reached as low as 26 Liras per US Dollar before stabilising around that level. We consider the market as maintaining a wait-and-see position ahead of the release. Should the market\u2019s expectations not be fulfilled with another rate hike, we may see the Lira tumbling lower once again. Last but not least we would also note the rise of gold\u2019s price over the past week, which was also triggered by the slowing of the US CPI rates for June and enhanced by the retreat of US yields. Overall the negative correlation of the USD to gold remains present and we expect gold\u2019s price to rise in the coming week should the USD weaken.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-59.png\")
<\/figure>\n\n\n\nJPY \u2013 Yen strengthening evident<\/h2>\n\n\n\n
tightening in the July meeting are intensifying. Market analysts tend to highlight the possibility of the bank tweaking again its Yield Curve Control policy allowing for its tolerance to Japanese Government Bond (JGB) yields to widen before proceeding with more bond purchases. The rumours were further fuelled by early signs of demand-led inflation, especially in the HORECA sector. Despite this being a plausible scenario, we tend to maintain the view that the bank may prefer to keep its settings unchanged, given that the general inflation level seems to continue to drop in Japan, forcing the bank to maintain a wait-and-see position on where inflation may settle down. Also, we would expect that BoJ may prefer not to widen its tolerance bands on JGB yields, but to erase them all together, should the time come. For the time being though even a stabilisation of market expectations that the end rate is nearing for the Fed but also a number of other central banks, may narrow the interest rate differentials and benefit JPY. On a more fundamental level, we note that JPY\u2019s dual nature as a safe haven may once again affect its course as should market worries ease further we may see JPY experiencing safe haven outflows.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-60.png\")
<\/figure>\n\n\n\nEUR \u2013 Fundamentals to continue leading the EUR<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-61.png\")
<\/figure>\n\n\n\nAUD \u2013 Employment data eyed<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-62.png\")
<\/figure>\n\n\n\nCAD \u2013 BoC hikes rates, remains hawkish<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-63.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n