Week Ahead – Acceptance

Heading for a recession?

This past week felt like a big moment for central banks and financial markets. It was the moment when the majority accepted that inflation isn’t just a problem, it’s one that needs to be dealt with powerfully in order to prevent it from spiralling out of control and becoming ingrained in the economy.

There are still those like the BoE that believe slow and steady will win the race, or the BoJ that doesn’t actually have an inflation problem, but rather a currency and policy conundrum, or the CBRT that has got itself in such a mess it doesn’t know what to do next. But for the majority, large rate hikes are the way forward, it’s just a case of how many.

What that means is volatility in the markets is probably going nowhere. Recessions are becoming increasingly likely, if not the base case, and central banks are content with that if it means inflation falls back to where it should be. Everything is going to be scrutinized going forward and could cause surges in volatility at any moment. Just look at Friday which was comparatively calm on the headline front.

Investors eye Powell testimonies

Can CBRT continue to avoid raising rates?

BoJ committed to yield curve control despite yen fallout


A brutal week on Wall Street that included a wrath of central banks tightening monetary policy has many traders focused on how soon the US economy will see a recession.  The Fed has signalled that it will take some time to tame inflation and that has driven expectations for a steady stream of massive rate hikes that will soon lead to a broader slowdown in the economy. 

The upcoming week is filled with Fed regional surveys, housing data, the flash PMI readings, and the final consumer sentiment survey.  On Tuesday, the May existing home sales report is expected to show the housing market continues to cool. Wednesday is all about Fed Chair Powell’s semi-annual testimony before the Senate panel.  Thursday is day 2 of Powell on Capitol Hill and has 2 big economic releases; initial jobless claims is expected to rise and the flash PMI readings could show further weakness with manufacturing activity and steady service sector activity.  Friday has the final University of Michigan sentiment readings and new home sales data that might bounce back after the prior month’s plunge.    


If there’s one thing we learned this week it’s that the ECB won’t necessarily wait for scheduled meetings when it comes to big monetary policy decisions. This time it was fragmentation issues but next time it may be something more.

Next week we have a variety of surveys that will be poured over for an indication of inflationary pressures abating and/or economic fears taking hold. There’s enormous scrutiny on the data now, as well as central bank speak, which will continue to be a major driver of market volatility.

Russia is cutting off some gas supplies to Germany and Italy, two of the remaining countries that have agreed to rouble terms. It’s been done under the guise of maintenance issues but many see it as a threat as countries try to build reserves ahead of the winter months.

French parliamentary second-round elections take place on Sunday and Emmanuel Macron appears concerned about the prospect of losing his party’s majority.


The BoE this week forecast inflation to peak above 11% in October while showing no urgency to do much about it. The economic cost is clearly weighing heavily on their judgement, with the belief being that 80% of the inflation overshoot is driven by energy and core goods and therefore not impacted by changes in rates. It’s hard to know at this point if the Bank is taking a massive gamble or preventing a severe recession. Either way, markets are forecasting another 1.75% of hikes between now and the end of the year. 

Next week offers inflation and retail sales data, along with flash PMI surveys. Central Bank speak will naturally be closely monitored as well.


Russia isn’t shying away from economic confrontation with Europe, targeting gas flows to Germany and Italy and that could ramp up over the next week. That aside, it’s looking quiet on the economic front.

South Africa

The SARB ramped up its tightening last month with a 50 basis point hike, the fourth consecutive meeting of increases. Inflation data next week could tell us whether this will become a trend or not, with the CPI number currently running at 5.9%, barely within the 3-6% inflation target band.


The CBRT meeting next week is obviously the highlight as the central bank’s resilience to the reality of its spineless, damaging economic experiment continues to be put to the test. Even if you put to one side the misguided beliefs that have driven such a bizarre policy action, it’s conducting the experiment at arguably the worst time in decades. How long until the CBRT accepts its poor judgement, swallows its pride and does the right thing? Inflation is running at 73.5% and the lira is back near last December’s lows. Life isn’t going to get any easier until it does.


China’s calendar week is quiet with just the one and two-year Loan prime Rate decisions on Monday. Given they declined to cut the MTF this week, further cuts are unlikely. A surprise cut could be a short-term positive for local equities.

It appears China’s “national team” has been supporting equities this week ahead of mass testing of the city of Shanghai this weekend (something they will keep doing each weekend into July). A threat to China’s covid-zero remains the biggest risk point in China right now. If cases are discovered over the weekend that threatens a return to lockdowns, Chinese and regional equities could fall, as well as regional currencies.


No significant data. Attention remains focused on the Indian rupee which has traced out record lows this week. A rise again in energy prices next week could trigger more weakness. 


RBA Governor Lowe speaks on Monday and Tuesday and the RBA Minutes are released. Markets will be looking for more signs of increased hawkishness by Lowe and the minutes and could be a negative for local equities.

The Aussie dollar continues to move entirely on global sentiment, and new lockdowns in China, or a stronger US dollar, could unwind the gains of this week. 

New Zealand

New Zealand releases consumer confidence and the balance of payments data on Wednesday. Given the weak GDP this week, both numbers have downside risk as the cost of living spirals out of control in New Zealand. The New Zealand dollar has underperformed the Aussie dollar this week as sentiment recovered post-FOMC, and seems likely to continue doing so.


Japan releases manufacturing and services PMIs on Thursday, but the only game in town is USD/JPY after the BOJ left monetary policy unchanged. USD/JPY is rallying into the end of the week and the BOJ has had to offer to buy unlimited amounts of JGBs to keep the yield cap in place. USD/JPY could continue to rise next week as markets test the BOJ’s mettle, with 140.00 now in sight as the US/Japan interest rate differential widens.

The Nikkei continues to slavishly track overnight Nasdaq moves.

Japan’s inflation release on Friday could heap more pressure on the BOJ and the yen if the reading is high.


Singapore releases May inflation data on Wednesday, and a very high print will add pressure on the MAS to announce an unscheduled tightening of policy after NODX data outperformed as well today. That could be positive for the Singapore dollar and negative for equities.

Economic Calendar

Saturday, June 18

Economic Data/Events

Fed’s Waller Discusses Monetary Policy

Sunday, June 19

Economic Data/Events

Colombian presidential elections runoff

IATA Annual General meeting in Doha

Second round of France parliamentary elections

Monday, June 20

Economic Data/Events

China loan prime rates

New Zealand performance services index

US markets closed for Juneteenth holiday  

EU foreign affairs ministers talk about Ukraine

Tuesday, June 21

Economic Data/Events

US existing home sales

Canada retail sales

New Zealand consumer confidence

Mexico international reserves

RBA Gov Lowe speaks at an American Chamber of Commerce event in Sydney

Primaries in Virginia and Washington, DC. Alabama, Georgia run-off elections

RBA minutes of its June interest rate meeting

German Chancellor Scholz, Economy Minister Habeck, Finance Minister Lindner speak at the BDI congress

South Africa President Ramaphosa, Finance Minister Godongwana and SARB Gov Kganyago speak at investor conference

Wednesday, June 22

Economic Data/Events

Fed’s Powell delivers semi-annual testimony before Senate panel


Canada CPI

South Africa CPI

New Zealand Trade

Thailand Trade

Australia leading index

Japan machine tool orders

New Zealand credit card spending

Eurozone consumer confidence

Bank of Japan minutes of April meeting

IEA World Energy Investment annual report

Thursday, June 23

Economic Data/Events

Fed’s Powell testifies before House Financial Services Panel

US initial jobless claims, US flash PMIs

Fed releases bank stress test results

European flash PMIs: Eurozone, France, Germany


Australia PMIs

Mexico Rate Decision: Expected to raise rates by 25bps to 7.75%

Norway Rate Decision: Expected to raise rates by 25bps to 1.00%

Turkey Rate Decision:  Expected to keep rates steady at 14.00%

Japan PMI, department store sales

Singapore CPI

China SWIFT payments, Bloomberg economic survey

South Korea PPI

Taiwan jobless rate, industrial production

Summit of EU leaders starts in Brussels

Eurozone ECB Publishes Economic Bulletin

EIA Crude Oil Inventory Report

Friday, June 24

Economic Data/Events

US new home sales, University of Michigan consumer sentiment

Germany IFO business climate

Japan CPI 

Thailand forward contracts, foreign reserves, capacity utilization, production index

China BoP

Singapore industrial production

Spain GDP

RBA Gov Lowe speaks at a UBS panel discussion about global monetary policy challenges in Zurich

BOJ Gov Amamiya speaks at the National Shinkin Conference

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Former Craig

Former Craig

Former 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.