Week Ahead – Rate hikes keep coming

Will a recession follow?

It’s been a slow start to the month in financial markets but the ECB rate decision on Thursday finally got things moving and the US inflation data on Friday kept it going into the weekend. With so much to look forward to next week, it’s going to get really interesting.

The Fed rate decision on Wednesday is naturally the highlight, as traders look for further indications of the level of tightening that’s going to be required and whether it will ultimately tip the economy into recession. The inflation data did not make for good reading for policymakers.

The BoE is expected to raise rates on Thursday but could it be tempted to go super-sized like many of its peers? Markets suggest there’s an outside chance. Then there’s the BoJ on Friday which has a very different problem to many of its peers.

How many more super-sized Fed hikes?

Will the BoE join the 50 basis point club?

Can the BoJ be tempted to tighten monetary policy?


The main event of the week will be the FOMC decision on Wednesday.  The Fed is widely expected to deliver a half-point rate increase and to signal more are coming as inflation remains scorching hot.  The Fed will need to signal more aggressive hikes are warranted and that they will do what is needed to get inflation under control. 

It is a busy week for economic data and it will start on Tuesday with PPI likely to tell a similar story as Friday’s hot inflation report. In addition to the Fed decision, Wednesday has two big reports: The Empire manufacturing survey should show a modest rebound. Most traders will fixate over retail sales for May, which could show consumer spending is weakening. Thursday will see the release of housing starts, jobless claims, and the Philly Fed business outlook. 

The 2022 midterms are not that far away and many traders will pay close attention to see if Republicans have a clean sweep.  Tuesday has primaries in Maine, Nevada, North Dakota, and South Carolina.       


A quiet week for the euro area with final inflation data among the highlights. Big revisions to the upside would pile further misery on households and businesses, not to mention the ECB which has finally come around to the idea that something needs to be done. And it absolutely will, a little bit next month and maybe more so again next quarter. The ECB really knows how to address urgent problems. Central bank speak including Christine Lagarde later in the week will be of interest although markets have already gone ahead and priced in 1.5% of hikes this year. Why bother waiting for the ECB to inevitably catch up?

The first round of French parliamentary elections will take place on Sunday.


The highlight next week is obviously the Bank of England meeting, with the central bank expected to hike by another 25 basis points to 1.25%. Given the shift of gear from numerous other central banks recently, could the MPC be persuaded to join the 50 basis point club? Markets view a one in three chance of it happening. It arguably should be higher given the same central bank is expecting double-digit inflation later in the year.

Next week also offers the usual data dump that comes around the third week of the month, with jobs, retail sales, GDP and industrial production figures all due. Needless to say, it’s going to be eventful for the pound.


Next week is relatively quiet for Russia, with revised GDP for Q1 the only notable release. The CBR cut rates to pre-war levels on Friday at 9.5% but the currency remains near its recent highs thanks to a ballooning current account as imports have collapsed in the aftermath of the invasion. 

The central bank has been patient in cutting rates again in the hope of lowering inflation which fell to 17.1% in May, down from 17.8% in April, giving the impression it may have peaked. With the economy performing better than feared and inflation heading in the right direction, further rate cuts could follow in an attempt to revive consumer demand and support the economy.

South Africa

A quiet week with retail sales on Wednesday the only notable release.


Nothing much on offer next week from Turkey, with the focus still being on the collapse of the lira as the most vulnerable EM currencies are punished in the global tightening environment. While the Turkish government and central bank repeatedly try to deflect blame for the currency woes and surging inflation, the blame lies much closer to home as the monetary experiment continues to go from bad to worse. 


China releases industrial output, retail sales and fixed asset investment on Wednesday and the 1-year MLF rate in the second half of the week. Chinese data should improve on the appalling April numbers in May as Shanghai and Beijing reopen, but will still be weak to negative. The 1-year MLF rate should stay unchanged at 2.85% as China persists with targetted stimulus aimed at MSME’s.

The main driver of volatility will be the Covid-zero policy with China announcing that 7 of Shanghai’s 16 districts will be tested over the weekend. Markets have been complacent around Covid-zero believing China was one and done. Unfortunately, omicron doesn’t work that way and if strict lockdowns spread once again, Chinese equities will be pummelled. Watch for developments on this front over the weekend and during the week.


India hiked rates again this past week and the RBI will be closely watching Wednesday’s inflation release for May. Inflation is expected to fall to around 7.0% from 7.80%, but a higher print will see RBI tightening expectations ratcheted up, which could weigh heavily on local equities.

Notably, the RBI rate hike and hawkish outlook did not benefit the Indian rupee this week and it remains near record lows at 77.800 to the US Dollar. A hawkish FOMC next week and softer inflation data could spur another bout of weakness in the currency. High oil prices are also another serious headwind.


Australian unemployment on Thursday is the only material data point this week and is usually only good for intraday volatility.

Both Australian equities and the AUD remain under pressure with the price action particularly negative on AUD/USD. Wobbly risk sentiment globally has pushed the currency lower, and fears over renewed Chinese lockdowns are also weighing heavily as a proxy for China. Readers should watch virus developments in China for directional inputs on AUD.

New Zealand

NZ GDP on Thursday and Business PMI on Friday are both expected to retreat sharply. Nerves continue rising around the NZ economy as it slows while the RBNZ tightens policy. Poor data this week could weigh heavily on the NZD/USD, which, like AUD/USD, is also extremely vulnerable to negative virus developments/slowdown risk from China this week.


The Bank of Japan announces its monetary policy decision on Friday, a day after the FOMC announcement (Asian time). Despite the huge fall in the Japanese yen in the past week, it would be an enormous surprise if Japan tinkered with monetary policy. Given the weight of long USD/JPY positioning out there, a tightening move by the BOJ, no matter how tenuous, could see USD/JPY correct strongly.

Otherwise, the yen continues to be pummeled as US yields rise back above 3.0%, widening the US/Japan rate differential.

Japan releases industrial production on Monday, and the Tankan Survey and Machinery Orders on Tuesday. Both should show a slight improvement on the economic reopening and a weaker yen, but will only drive short-term intraday liquidity. 


Singapore releases non-oil exports on Friday. A volatile series and poor data could be a short-term negative factor for local stocks. The SGD has been heavy this week and negative virus developments from China in the week ahead could accelerate USD/SGD strength.

Economic Calendar

Sunday, June 12

Economic Data/Events

France holds the first round of parliamentary elections

The World Trade Organization begins its ministerial meeting 

Monday, June 13

Economic Data/Events

China medium-term lending

India CPI

Japan business conditions index

New Zealand net migration

Turkey current account, industrial production

UK industrial production, trade data

Norway monthly GDP

ECB’s Luis De Guindos participates in a meeting on “The challenges of enhancing financial stability in the recovery phase from the Corona pandemic” organized by the Arab Monetary Fund.

Italian Prime Minister Mario Draghi travels to Israel

Tuesday, June 14

Economic Data/Events


Australia household spending, business confidence

Germany CPI, ZEW survey expectations

India trade, wholesale prices

Japan industrial production, capacity utilization

Mexico international reserves

New Zealand food prices

UK jobless claims, unemployment

ECB’s Schnabel speaks at Universite Paris 1 Pantheon-Sorbonne

Wednesday, June 15

Economic Data/Events

FOMC Decision: To raise rates by a half-point and update economic projections

US cross-border investment, business inventories, empire manufacturing, retail sales

Poland CPI

Germany CPI

France CPI

Sweden CPI

Australia consumer confidence

Canada housing starts, existing home sales

China retail sales, industrial production, surveyed jobless rate, fixed assets, residential property sales

Eurozone industrial production, trade balance

Japan machinery orders, tertiary index

New Zealand BoP, current account GDP ratio

Russia GDP

South Africa retail sales

ECB President Christine Lagarde participates in a discussion hosted by the London School of Economics

ECB’s Mario Centeno, Pablo Hernandez de Cos, Klaas Knot and Joachim Nagel speak at Young Factor web event

ECB’s Panetta gives an introductory statement at a hearing on the digital euro before the Committee on Economic and Monetary Affairs in the European Parliament

UK Prime Minister Boris Johnson due to take questions in Parliament

Thursday, June 16

Economic Data/Events

US housing starts, initial jobless claims

Australia unemployment, consumer inflation expectations

China property prices

Eurozone new car registrations

Hungary one-week deposit rate

Italy CPI

Japan trade, department store sales

New Zealand GDP

Spain trade

Switzerland rate decision: No change expected with Policy Rate

UK BOE rate decision: Expected to raise Bank Rate by 25bps to 1.25%

ECB’s Centeno, de Cos, de Guindos, Knot, Vasle, Visco and Villeroy speak at Young Factor web event.

ECB’s Panetta speaks at European Payments Council’s 20th-anniversary event in Brussels.

ECB’s Vasle speaks at a Slovenian banking conference.

Friday, June 17

Economic Data/Events

US Conference Board leading index, industrial production

BOJ Rate Decision: To stand pat on rates

Eurozone CPI

Hong Kong jobless rate

Italy trade

UK retail sales

New Zealand PMI

Singapore non-oil domestic exports, electronic exports

Thailand foreign reserves, forward contracts, car sales

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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