The European Central Bank, in line with market expectations, cut interest rates by 25 bps, giving no indication of further intentions. With this, the ECB ended its policy of tightening interest rates. Despite this, the EUR/USD exchange rate remained virtually unchanged around 1.09. The Monetary Policy Council (MPC) maintained the reference rate at 5.75 per cent. It is expected that due to high inflation and a revival in consumption, further interest rate cuts in Poland will not be possible until next year at the earliest. Conotoxia analysts' baseline scenario assumes that the zloty should not experience a sustained weakening, despite the fact that the EUR/PLN and USD/PLN rates have risen in the past few days. In the coming week, we will learn the Fed's interest rate decision following the publication of Wednesday's inflation data from Germany and the US. President Jerome Powell will then outline his expectations for future action by the US central bank. The week will conclude with an interest rate decision at the Bank of Japan, where investors are wondering whether the central bank will decide to raise rates after a failed currency intervention to defend the value of the yen.
Table of contents:
- German consumer price index (CPI) annualised (May)
- US consumer price index (CPI) annualised (May)
- US interest rate decision
- Interest rate decision in Japan
- Stocks to watch
Wednesday, 12.06, 8:00 CET, German consumer price index (CPI) annualised (May)
Germany's annual inflation rate rose to 2.4 per cent in May 2024, compared to a three-year low of 2.2 per cent. This was the first increase in inflation in five months, with service and food prices accelerating while commodity costs fell. In addition, energy prices continue to fall, despite the end of energy price braking programmes and the introduction of higher carbon levies in early 2024 and the end of the temporary VAT cut on gas in April 2024.
The current analyst forecast is for inflation to remain at 2.4 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the EUR, while a lower-than-expected reading could be bearish for the EUR.
Impact: EUR/USD
Wednesday, 12.06, 14:30 CET, US consumer price index (CPI) annualised (May)
The US annual inflation rate fell to 3.4 per cent in April 2024 from 3.5 per cent in March. Food prices remained stable and accommodation price increases slowed. New and used car prices continued to fall. Energy costs, on the other hand, increased slightly, mainly through higher petrol prices, although gas and heating oil prices fell. The increase in transport and clothing costs accelerated.
The current analyst forecast is for inflation to remain at 3.4 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could have a bullish impact on the USD, while a lower-than-expected reading could be bearish for the USD.
Impact: EUR/USD
Wednesday, 12.06, 20:00 CET, US interest rate decision
According to the CME FedWatch tool, the market expects the first interest rate cut of 25 bps with a probability of 81 per cent, expected in September this year. There is currently a 97.5 per cent probability that rates will remain unchanged in June. A possible earlier cut could be influenced by weaker GDP data or inflation falling faster than expected.
The current analyst forecast is for US interest rates to remain in a range of 5.25-5.5 per cent.
Source: Tradingeconomics.com
A higher-than-expected interest rate could be bullish for the USD, while a lower-than-expected interest rate could act bearishly on the USD.
Impact: EUR/USD
Friday, 14.06, 5:00 CET, interest rate decision in Japan
By raising interest rates to 0.1 per cent, the Bank of Japan warned of a possible rise in prices and announced its readiness to change its policy. However, according to the bank's April meeting, financial conditions will remain unchanged for the time being. The bank highlighted various factors that could affect prices, such as wage growth, the depreciation of the yen, government policy, labour shortages and rising commodity prices. The BoJ is also watching how companies and consumers react, which could influence further decisions on interest rate hikes. A representative from Japan's finance ministry urged the bank to work with the government to achieve a stable inflation rate of 2 per cent.
Analysts currently forecast that interest rates in Japan will remain at 0.1 per cent, still making it the country with the lowest rates in the world.
Source: Tradingeconomics.com
A higher-than-expected interest rate could be bullish for the JPY, while a lower-than-expected interest rate could act bearishly on the JPY.
Impact: USD/JPY, EUR/JPY
Stocks to watch
- Oracle
Technology giant Oracle will release results for its latest financial quarter on Tuesday. Analysts expect Oracle to announce a 1.8 per cent year-on-year decline in quarterly profit, while revenue is expected to increase 5.2 per cent year-on-year. Over the past 30 days, consensus earnings have remained unchanged, indicating stability in analysts' predictions.
Oracle shares are still in a multi-year uptrend despite the slowdown. The average price forecast by analysts is USD 137.2, 11 per cent above current levels.
- Adobe
Adobe, responsible for software for graphic designers such as Photoshop and Premiere Pro, will release results for its latest financial quarter on Thursday. In the first quarter of 2024, Adobe reported an 11 per cent increase in revenue and an 18 per cent increase in profits. The company is successfully integrating artificial intelligence into its platforms, which is contributing to long-term customer growth. Despite competition from new players, Adobe continues to dominate the creative software market.
Despite a 25 per cent decline in share value over the past six months, the average price forecast by analysts is $608, 32 per cent above current levels.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
The above trade publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No. 596/2014 of April 16, 2014. It has been prepared for informational purposes and should not form the basis for investment decisions. Neither the author of the publication nor Conotoxia Ltd. shall be liable for investment decisions made on the basis of the information contained herein. Copying or reproducing this publication without written permission from Conotoxia Ltd. is prohibited. Past performance is not a reliable indicator of future results.
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