Currencies in holding pattern ahead of fresh inflation data
G10 currencies ended the week not far from where they had started it, as the news calendar turned relatively light and investors digested central bank communications.
The week’s winners were the Norwegian krone and the Swiss franc, the latter boosted by the aftereffects of the Swiss National Bank’s dramatic hawkish surprise earlier in the month. Emerging market currencies were a mixed bunch, but for the most part they held up rather well in view of the massive sell-off we saw last week across the commodity complex.
The rally in risk assets last week suggests some easing on investor concerns about the inevitability of a recession, as central banks struggle to get inflation under control. Inflation data out on Thursday and Friday will be in focus on both sides of the Atlantic this week. The US May PCE data will likely confirm the earlier CPI report. More critical will be the Eurozone flash inflation report for June, the earliest read of inflation across all economic areas. A print above 4% in the core index would put further pressure on the ECB to accelerate its timetable for hikes, potentially buoying the common currency.