• Back in action with a full US data calendar and Fedspeak

• BoE meets but unlikely to produce headlines

• SNB cuts rates and remains willing to intervene in FX markets

• Yen underperforms as Japanese officials remain quiet

The rare mid-week day-off in the US is over with the market mostly preparing for tomorrow’s key release of the preliminary PMI surveys, which are critical for the euro area. The relaxation of both the political fears regarding the imminent French parliamentary elections and the concerns about another euro area debt crisis has allowed the euro to recoup part of its losses against the US dollar.

The focus today turns to the US as at least three Fed speakers will be on the wires. Regional Fed presidents Kashkari, Barkin and Daly are scheduled to speak today with the market expecting hawkish commentary. However, it is important to stress that none of these speakers is a voter in 2024, thus potentially limiting their influence on the market at this juncture.

Regional Fed presidents Kashkari, Barkin and Daly are scheduled to speak today ... but none of these speakers is a voter in 2024

On the flip side, jobless claims and the various housing sector-related data prints have the potential to move the market. Chairman Powell talked about the impact of higher rates on the housing market at the last Fed meeting press conference, and it would be interesting to see if his concerns are justified.

The BoE holds its fourth rate-setting meeting for 2024 with the market expecting no change in the base rate. Yesterday’s mixed inflation report confirmed the very gradual disinflation process in place, but with the labour market remaining tight and average earnings growing strongly, the fight to control runaway inflation is far from over.

With the general elections just two weeks away, BoE members’ public appearances have been kept to a minimum lately to avoid criticism of intervening in the elections. Consequently, both the monetary policy statement and the voting pattern – 2 members voted for a rate cut in May – are unlikely to show major changes. Additionally, the BoE is probably lucky enough that a press conference has not been scheduled for today.

Both the monetary policy statement and the voting pattern are unlikely to show major changes

Despite this lack of public communication, the BoE has not gone into hibernation and is preparing for the key August 1 gathering. The meeting will include both the quarterly projections and a press conference to explain any likely rate change or prepare the ground for a move in September. Interestingly, most market economists appear convinced that a 25bps rate cut will be announced in August.

Amidst these developments, the pound has been giving back some of its recent gains against the euro although this move has mostly been a product of lower political risk in the euro area. A quiet meeting today could allow the euro/pound pair to drift higher, while a strongly dovish statement, essentially opening the door to a rate cut in August, could push euro/pound aggressively towards the 0.8504 level.

The SNB announced a 25bps rate cut and reiterated its intention to continue intervening in the FX market. With its inflation projections revised a tad lower for both 2025 and 2026, the door remains open to further rate cuts down the line. The Swiss franc is underperforming against the euro and getting closer to a key resistance area.

With the market’s attention firmly on the euro area, dollar/yen has been edging higher. It has managed to climb above the 158-yen level and very close to its end-April level that caused a double BoJ intervention. The market remains disappointed by the lack of action from the BoJ, despite its announcement to taper its bond buying programme.

The market remains disappointed by the lack of action from the BoJ

Interestingly, government officials have been very quiet and have avoided their usual verbal interventions. They might be hoping that incoming data could help the yen recover, starting with the national CPI report published in tomorrow’s Asian session, which is expected to show a small pickup in inflationary pressures.