Ahead of the game: 16 June 2025

Global cues steady Wall Street as Australia 200 rides energy rally

United States (US) stock markets edged higher as Federal Reserve (Fed)-friendly inflation data and strong earnings from Oracle were balanced by a spike in Middle Eastern geopolitical tensions and tariff concerns.

Locally, the Australia 200 (ASX 200) is on track for its eighth week of gains in the past nine. The index was supported by a strong rally in energy stocks, while the rally in the big banks faded towards the end of the week.

The week that was: highlights

• The US consumer price index (CPI) report for May was cooler than expected. Headline inflation rose 0.1% month-on-month (MoM), leading to the annual rate ticking higher to 2.4%. Core inflation also rose 0.1% MoM, allowing the annual rate to remain at 2.8% year-on-year (YoY), below the expected 2.9%
• The producer price index (PPI) report for May showed headline PPI rose 0.1% MoM, leading to the annual rate ticking higher to 2.6%. Core inflation also rose 0.1% MoM, allowing the annual rate to ease to 3% from 3.2%
• US initial jobless claims stayed at 248,000 in the first week of June, defying expectations for a drop to 240,000, while continuing claims jumped by 54,000 to 1,956,000, the highest since mid-November 2021
• In the United Kingdom (UK), the unemployment rate for April edged up to 4.6% from 4.5%, reaching its highest level since the three months ending August 2021. It was accompanied by a fall of 109,000 in the number of employees on company payrolls and cooler wages data as average earnings excluding bonuses rose 5.2% compared to the expected 5.3%
• Staying in the UK, the gross domestic product (GDP) contracted by 0.3% in April, significantly more than the anticipated -0.1%
• In China (CN), CPI in May fell -0.1% YoY for the fourth straight month of consumer deflation. Meanwhile, PPI fell 3.3% YoY in May, marking the 32nd consecutive month of producer deflation
• Also in CN, the trade surplus widened sharply to $103.22 billion in May as exports rose by 4.8% YoY, but imports fell by 3.4% YoY impacted by tariffs
• In Australia (AU), the Westpac consumer confidence index rose 0.5% to 92.6 in June. This was below the market's expected 94.4, leaving the index well below the long-term average and hinting strongly at the need for further monetary policy easing from the Reserve Bank of Australia (RBA)
• Still in AU, the National Australia Bank (NAB) business confidence index rose to 2 from -1 prior, back into positive territory for the first time since January
• Crude oil  surged 14.66% this week to $74.06
• Gold rose 3.72% this week to $3433
• Bitcoin fell 1.86% this week to $103,828
• Wall Street's gauge of fear, the volatility index (VIX), rose 7.33% from 16.78 to 18.01.

Key dates for the week ahead

Australia & New Zealand

• New Zealand (NZ): Current account (Wednesday, 18 June 8.45am AEST)
• NZ: GDP for the first quarter (Q1) 2025 (Thursday, 19 June 8.45am AEST)
• AU: Employment (Thursday, 19 June 11.30am AEST)

China & Japan

• CN: House price index (Monday, 16 June 11.00am AEST)
• CN: Retail sales, fixed asset investment (FAI) and industrial production (IP) (Monday, 16 June 12.00pm AEST)
• Japan (JP): Bank of Japan (BoJ) interest rate decision (Tuesday, 17 June 1.00pm AEST)
• JP: CPI (Friday, 20 June 9.50am AEST)
• CN: Loan prime rate (Friday, 20 June 11.15am AEST)

United States

• US: Retail sales (Tuesday, 17 June 10.30pm AEST)
• US: Building permits and housing starts (Wednesday, 18 June 10.30pm AEST)
• US: Federal Open Market Committee (FOMC) interest rate decision (Thursday, 19 June 4.00am AEST)

Europe & United Kingdom

• UK: Inflation (Wednesday, 18 June 4.00pm AEST)
• UK: Bank of England (BoE) interest rate decision (Thursday, 19 June 9.00pm AEST)
• UK: Retail sales (Friday, 20 June 7.00pm AEST)

Key events for the week ahead

JP: BoJ interest rate decision

Date: Tuesday, 17 June

The Bank of Japan (BoJ) left its key policy rate unchanged at 0.50% in May for the second consecutive meeting after raising rates by 25 basis points (bp) in January. The decision was widely expected amid the growing threat from US tariffs to Japan’s export-reliant economy.

The BoJ reaffirmed its commitment to tighten policy if growth and inflation remain consistent with its 2% target, which headline inflation has exceeded for 36 months.

Since May, core inflation has risen to 3.5% YoY - the highest in two years - driven by elevated food costs and wage growth. Analysts expect a further rise to 3.6% YoY in the May inflation report due Friday.

Despite rising inflation, softening consumption and output suggest the BoJ will likely hold rates steady at 0.50%. Focus will be on the BoJ’s updated forecasts and forward guidance during the press conference.

Markets are pricing in a 55% chance of a 25 bp hike by year-end.

BoJ Policy rate chart

US: FOMC interest rate decision

Date: Thursday 19 June, 4.00am (AEST)

At its last meeting, the Fed held the Federal Funds rate at 4.25% – 4.50%, citing rising risks of higher unemployment and persistent inflation. Fed Chair Jerome Powell noted the economy remains solid, and that the Fed will monitor the impact of President Trump’s tariff policy before making any moves.

While survey data has softened, hard data (including the recent non-farm payrolls) remains robust. The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, stands at 2.5%, showing no tariff-related inflation surge.

As such, the Fed is expected to maintain current rates while reiterating its data-dependent stance. Powell is expected to emphasise a cautious approach and resist political pressure to cut.

Markets are pricing in no change next week, with an 80% chance of a 25 bp cut in September and 50 bp of cumulative easing priced by year-end.

US Fed Funds rate chart

AU: Employment report

Date: Thursday 19 June, 11.30am (AEST)

In April, Australia added 89,000 jobs - well above the 25,000 forecast - while the unemployment rate held at 4.1%. The participation rate also rose to 67.1% from 66.8%, marking the 17th straight month unemployment has stayed within a 3.9% - 4.1% band.

The data confirmed labour market resilience but did not prevent the Reserve Bank of Australia (RBA) from delivering a 25 bp rate cut the following week. However, it likely deterred a larger 50 bp move.

Consensus expects 20,000 new jobs in May, with the jobless rate steady at 4.1%. Unless results exceed expectations, the RBA is expected to deliver another 25 bp cut on 8 July, lowering the Cash rate to 3.60%.

AU unemployment rate chart

UK: BoE interest rate decision

Date: Thursday 19 June, 9.00pm (AEST)

At its May meeting, the BoE's monetary policy committee voted 5:4 to reduce the Bank rate to 4.25%. Two members preferred a larger 50 bp cut; two others wanted no change. The tone reflected ongoing uncertainty surrounding US tariffs.

Since then, UK inflation has reaccelerated to 3.5%, largely driven by surging utility prices. Payroll employment fell by 109,000 - the largest drop since May 2020. GDP also contracted by 0.3% MoM in April, its sharpest fall since October 2023.

Markets assign a 90% probability to the BoE holding rates steady next week, with two rate cuts priced in for August and December, bringing the Official Bank rate down to 3.75%.

BoE Official Bank rate chart