points rate hike as expected and maintain a rather hawkish tone in its accompanying statement foreshadowing more rate hikes to come we may see the USD getting asymmetric support as the market may have to reposition its expectations. On the flip side, should the bank sound uncertain or allow for the notion that it has reached its terminal rate, then the market\u2019s expectations are to be justified and we may see the USD losing some ground.<\/p>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-92.png\")
<\/figure>\n\n\n\nGBP \u2013 Inflation eases<\/h2>\n\n\n\n
The pound seems about to end the week lower against the USD, the EUR but not JPY. The weakening of the pound is understandable on a macroeconomic level after the slowdown of UK\u2019s CPI rates for June. The easing of inflationary pressures was characteristic as the rates slowed down in June, more than expected both on a headline as well as on a core level. Nevertheless, the rates are still at very high levels, considering BoE\u2019s target of 2%. Hence, BoE still has to maintain an aggressive rate-hiking stance, yet the slowdown of the CPI rates tends to ease the pressure on BoE. The market\u2019s expectations for the terminal interest rate seem to have been lowered and are now expected to reach 6.0% by the end of the year. It\u2019s characteristic that the UK bond yields dropped after the inflation prints were released with the 10-year bond yield dropping as low as 4.184% a level not seen since February. Overall though we tend to maintain our expectations for the bank to continue being aggressively hawkish, especially after the replacement of former BoE MPC member Tenreyro with Megan Greene, which seems to be leaning towards the hawkish side strengthening the balance of power in favour of the hawks further. On the other hand, though BoE\u2019s monetary policy tightening, tends to slow economic growth in the UK hence we tend to highlight the release of the preliminary PMI figures of July, with special emphasis on the services sector indicator. Should the readings show an additional slowdown of economic activity in the UK we may see the pound slipping, but we also expect the CBI indicators to gather attention by pound traders.<\/p>\n\n\n\n JPY seems about to end the week lower against the USD and the EUR and slightly the pound, in a sign of broader weakness. On a macroeconomic level, we note the improvement of the trading balance, turning marginally positive in June, for the first time in the past two years. The release could be perceived as another positive sign of Japan\u2019s economic recovery. On the other hand, the easing of inflationary pressures in June seems to be stalling. Yet, BoJ seems to be determined to maintain its ultra-loose monetary settings in place. It\u2019s characteristic that BoJ Governor Ueda stated that to reach sustainably and in a stable manner the bank\u2019s 2% inflation target, there is still some ground to cover. The statement also tends to strengthen the notion that the bank is not yet ready to tweak its Yield Curve Control (YCC) policy. Hence the bank\u2019s meeting in the coming week is coming under the market\u2019s magnifying glass. The bank is expected to maintain the interest rate at -0.10 and characteristically JPY OIS implies that the market has that scenario almost fully priced in. Given also the statements of BoJ Governor Ueda mentioned before we expect the bank to maintain its dovish The common currency edged lower against the USD in the past week, while tended to gain extensively against the pound and to a lesser degree against the JPY. On a macro level, we note that the slowdown of the HICP rate for June in the Eurozone was confirmed yet EUR traders are to have a busy week ahead. Making a start on Monday with the release of July\u2019s preliminary PMIs with the market focus expected to be placed on Germany\u2019s manufacturing sector. On Tuesday we note Germany\u2019s Ifo indicator for July, yet the highlight of the week for EUR traders is expected to be ECB\u2019s interest rate decision on Thursday. The bank is expected to hike rates by 25 basis points and currently, EUR OIS imply a probability of 97.76% for such a scenario to materialise. The market currently, seems to be expecting the bank to hike rates again in September. Hence should the bank actually deliver the rate hike as expected, the next points of attention are to be the accompanying statement and ECB President Christine Lagarde\u2019s press conference. Should the bank maintain its hawkish tone we may see the common currency getting some support while should the bank signal that its terminal rate has been reached or is nearing we may see the EUR retreating. Yet EUR trader\u2019s interest is to be maintained as on Friday we note the release of France\u2019s and Germany\u2019s preliminary HICP rates for July and France\u2019s preliminary GDP rate for Q2. Should the HICP rates stall to slow down we may see EUR getting some support.<\/p>\n\n\n\n AUD is about to end the week lower against the USD yet recent data tended to limit the Aussie\u2019s losses. On a macroeconomic level, we note that Australia\u2019s employment data for June beat expectations, with the unemployment rate ticking down while the employment change figure dropped less than expected. The The CAD is about to end the week in the greens against the USD for the second week in a row. It should be noted that even the considerable slowdown of Canada\u2019s CPI rates for June was not able to halt the CAD\u2019s winning streak. It\u2019s characteristic that the headline rate slowed down and entered BoC\u2019s 2-3% target range, with the core rate still remaining just barely out of range. The release tended to enhance market expectations for the bank to remain on hold in its September meeting, yet another rate hike in the coming months is still possible. So there is still some uncertainty is maintained for the bank\u2019s intentions. It should also be noted that the number As a general comment, we expect volatility to rise in the coming week as the number of high-impact financial data is to increase as are also the number of monetary policy events mentioned before. The USD may increase its dominance in the FX market mainly, yet certain releases may allow other currencies to navigate more independently. Yet the initiative over moves in the FX market is to remain in USD\u2019s hands, with the release of the US GDP rate for Q1 and the Fed\u2019s interest rate decision weighing considerably. Yet the Fed\u2019s interest rate decision, is to have wider ripple effects as it can affect also US stock markets as well as gold\u2019s price. It should be noted that US stock markets maintained their upward motion over the past week. The earnings season is in full mode with corporations such as large banks like Wells Fargo, JP Morgan, City Group, Bank of America, Morgan Stanley and Goldman Sachs surpassing market expectations and showing overall some resilience considering the tight financial environment in the US. Other companies\u2019 earnings reports such as Tesla and Netflix had a negative impact on their share price. In the coming week we expect a shift of the market attention towards the tech sector as we expect the earnings releases of Microsoft (#MSFT), eBay (#EBAY), Meta Platforms (#META), Alphabet (#GOOG), Intel Corporation (#INTC) and Amazon (#AMZ) among others. As for gold\u2019s price, we note that the precious metal seems to have taken advantage of USD weakness as it was on the rise. We expect the negative correlation of the USD with gold\u2019s price to be maintained in the coming week with the US yields also playing a substantial role given that US Bonds tend to be a competing trading instrument to gold. Should the USD gain, Gold\u2019s price may drop and vice versa.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-93.png\")
<\/figure>\n\n\n\nJPY \u2013 BoJ\u2019s to remain dovish<\/h2>\n\n\n\n
stance in the accompanying statement. Should the bank actually remain dovish as expected, we may see JPY weakening as monetary outlook differentials with other central banks would be expected to widen. On a more fundamental level, we highlight JPY\u2019s dual nature as a safe haven and a national currency. Hence should the market sentiment turn more risk-oriented, that may provide some outflows for JPY and vice versa.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-94.png\")
<\/figure>\n\n\n\nEUR \u2013 ECB to hike rates again<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-95.png\")
<\/figure>\n\n\n\nAUD \u2013 CPI rates in focus<\/h2>\n\n\n\n
better-than-expected data may sharpen RBA\u2019s hawkishness somewhat. We note that the release of RBA\u2019s minutes for the July meeting tended to imply that more rate hikes may be required for inflationary pressures to be satisfactorily curbed. Characteristically the document stated that \u201cMembers agreed that some further tightening of monetary policy may be required to bring inflation back to target within a reasonable timeframe, but that this depended on how the economy and inflation evolve\u201d. On the side we would also note that RBA Governor Lowe is to step down after the end of his term, as he received substantial criticism on a political level for hiking rates for the bank increasing the interest rate and is to be replaced by RBA Deputy Governor Michelle Bullock, starting from mid-September. Yet we do not expect the bank to alter its monetary policy because of a change of leadership and to remain mostly data-driven. In the coming week, we would highlight the release of the CPI rates for Q2 and should there be an acceleration of the rates and given the tightness of the Australian employment market we may see the pressure building up on RBA for another rate hike. On a more fundamental level, we note that the measures taken by the People\u2019s Bank Of China to support the Yuan tended also to provide support for AUD. Let\u2019s not forget that at the start of the week, the release of China\u2019s GDP rates and other data tended to create some worries for the recovery of the Aussie and thus weakening the Aussie. Also, should the market sentiment turn more risk-oriented, we may see the Aussie getting some support as it is considered a more risky asset given its commodity-linked nature and vice versa.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-96.png\")
<\/figure>\n\n\n\nCAD \u2013 CPI rates slow down<\/h2>\n\n\n\n
of house starts has risen for June bearing good news for the construction sector of Canada in spite of BoC\u2019s cumulative tightening. Please note that the retail sales growth rate for May is still to be released and could alter CAD\u2019s direction. In the coming week, we note the release of Canada\u2019s business barometer for July on Thursday and the GDP rate for May due out on Friday. Especially a possible acceleration of the GDP rate could provide additional support for the Loonie. On a more fundamental level, we note that oil prices edged higher for a fourth week in a row. Oil prices seem to be caught between a tightening supply side which tends to support oil prices and a weakening demand outlook for the commodity, especially from China which tends to weigh on the commodity\u2019s prices. Should oil prices continue to be on the rise, we may see the Loonie getting some support given that Canada is a major oil-producing economy.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/07\/image-97.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n