Last week we saw record highs for CPI (Inflation) out of Europe- which has spurred many ECB policymakers to begin making public statements about interest rate hikes, with the first expected in July and another priced in for September (25 bps each time.) With the ECB currently in negative territory, this is a big move.
However, with the ECB due to have a rate decision this week, many analysts are wondering if a surprise rate hike is on the cards- unfortunately, it is not priced in, and would make sense to do- it just comes down to how hawkish the ECB is, if we were to see a rate hike this week, the Euro would strengthen in a big way against the Dollar and Sterling. Even if there is no hike, a confirmation of the July rate hike may be enough to strengthen the Euro a little this week.
Moving on to the UK, the real topic of focus right now is PM Boris Johnson and the potential of a “No confidence” Vote- right now many MP’s believe that enough letters will go in this week to trigger the vote, which could negatively affect Sterling, but, long term I do not think the PM is really at risk of losing the vote, so we would expect to see the Pound bounce back after the event if this were to happen. Of course, if for some reason the PM were to lose, then Sterling would quickly lose a lot of ground with the uncertainity.
Apart from the above, we are not expecting a busy week, so if you have any upcoming transactions you would like some assistance on, please let me know.
Also, I will be out of the office from 9th June and returning on 29th June- but my dealers will be able to assist you, if you require anything before I leave, just drop me a message.