Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Ahead of the game: June 19, 2023

Stock Source: Bloomberg

Wall Street extended gains this week, as the S&P500 and the Nasdaq surged to 52-week highs following a soft consumer price index (CPI) release and the Federal Reserve (Fed) pause that the equity market hopes will mark the end of the Fed’s tightening cycle.

Locally, a red-hot labour force report fuelled fears of further Reserve Bank of Australia (RBA) rate hikes. Confounding those looking for evidence that the RBA’s cumulative 400 basis point (bp) of rate hikes to date have taken some of the heat out of a tight Australian labour market.

  • Employment rose by 75.9K in May vs 17.5K expected.
  • The unemployment rate fell to 3.6% vs 3.7% expected.
  • The participation rate rose from 66.7% to 66.9%.

The extraordinarily strong jobs number will provide little comfort to the RBA, given its concerns about a tight labour market, rising wages and poor productivity feeding through into inflation. The rates market now sees a 50% chance of a 25bp rate hike in July.

In Europe, the European Central Bank’s (ECB) raised its deposit rate by 25bp to 3.50% (its eighth consecutive hike). The ECB endorsed market pricing of another 25bp rate hike in July, and a hawkish bias in the statement warns that a rate of 4.00% before year-end is not out of the question.

Next week, the key events will be Tuesday’s RBA meeting minutes, a Bank of England (BoE) interest rate meeting, Fed Chair Powell’s testimony, and Flash purchasing managers index (PMI) in Europe and the US.

  • The Fed kept rates unchanged for the first time in 15 months but delivered an even more hawkish hold than most expected.
  • The Fed’s new dot plot shows members expect at least another 50bp of rate hikes this year.
  • The annual headline inflation rate in the US fell in May to 4.0% year-on-year (YoY) (from 4.9% in April), its lowest level since March 2021.
  • The S&P500 and the Nasdaq both traded at 52-week highs.
  • The ECB raised rates by 25bp as expected to 3.50% and endorsed market pricing of another 25bp rate hike in July.
  • The PBoC cut interest rates, responding to sluggish economic data.
  • The NZ economy entered recession as GDP fell by -0.1% in Q1 2023, following a -0.7% fall in Q4 2022.
  • The Australian Labour Force report for May was red hot as employment rose by 75.9k in May vs 17.5k expected, and the unemployment rate fell to 3.6% from 3.7%.
  • The ASX200 snapped its three-week losing streak, reclaiming 7200.
  • After a dip to below $67 earlier in the week, crude oil bounced back above $70, hoping that rate cuts in China will increase demand for oil.
  • Gold spent another week trading around $1950.
  • The measure of fear on Wall Street, the Volatility (VIX) index, rose 4.7% to 14.49.
  • AU – RBA meeting minutes (Tuesday, June 20 at 11.30 am)
  • NZ – Westpac Consumer Confidence (Wednesday, June 21 at 7.00 am)
  • NZ – Balance of Trade (Thursday, June 22 at 8.45 am)
  • AU – Judo Bank Flash PMIs (Friday, June 23 at 9.00 am)
  • CH – Loan Prime Rate (Tuesday, June 20 at 11.15 am)
  • JP – BoJ Meeting Minutes (Wednesday, June 21 at 9.50 am)
  • JP – Inflation (Friday, June 23 at 9.30 am)
  • JP – Jibun Bank Flash PMIs (Friday. June 23 at 10.30 am)
  • US – Building Permits (Tuesday, June 20 at 10.30 pm)
  • US – Fed Chair Powell Testimony (Friday, June 23 at 12.00 am)
  • US – S&P Flash PMIs (Friday, June 23 at 11.45 pm)
  • UK – Inflation (Wednesday, June 21 at 4.00 pm)
  • UK – BoE interest rate meeting (Thursday, June 22 at 9 pm)
  • UK – Gfk Consumer Confidence (Friday, June 23 at 9.01 am)
  • UK - Retail Sales (Friday, June 23 at 4.00 pm)
  • GE – Flash PMIs (Friday, June 23 at 5.30 pm)

Australia

RBA Meeting Minutes (Tuesday, June 20 at 11.30 am)

The Minutes from the Reserve Banks meeting in June are scheduled to be released Tuesday, June 20, at 11.30 am. At its meeting in May, the RBA surprised the market by raising the cash rate by 25bp from 3.85% to 4.10%.

Choosing to look through softer labour market and retail sales data in May, the RBA focused on elevated inflation, rising unit labour costs, wages, and poor productivity.

“While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.”

At the meeting, the RBA retained its tightening bias and noted that a further tightening of “monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve."

The Board meeting minutes would be expected to reiterate the sentiments outlined above. While the strong labour market report this week has heightened expectations of a rate hike in July, the Minutes will still be closely scrutinised for clues about what other factors would prompt the RBA to act on its tightening bias and what factors might see the RBA pause its rate hiking cycle.

RBA cash rate chart1
RBA cash rate chart1

UK

BoE interest rate meeting (Thursday, June 22 at 9 pm)

At its May meeting, the BoE raised the bank rate by 25bps to 4.5% for its twelfth consecutive rate increase.

The BoE’s latest rate rise took the bank rate to its highest level since 2008 as it fights persistent inflationary pressures, including a tight labour market and stronger-than-expected growth momentum.

The market is fully priced for the BoE to lift rates by 25bp net week to 4.75%. There is a small 15% chance of a larger 50bp next week which may gain more traction if Wednesday night’s May CPI release is hotter than expected. On that note, the market is looking for inflation to rise in May by 8.5% YoY from 8.7% in April.

Looking further afar, the UK rates market is almost fully priced for five more 25bp rate hikes from the BoE for a terminal rate of 5.75% by year-end.

Official Bank Rate chart2
Official Bank Rate chart2

US

S&P Flash PMIs (Friday, June 23 at 11.45 pm)

In May, the S&P Global US Composite PMI rose to 54.3, above April’s final reading of 53.4, for the fastest expansion rate in over 12 months.

The rise was driven by gains in the services sector which helped offset continued softness in the manufacturing sector.

For June, a slight fall is expected in the composite to 53.7, which would still reflect solid growth in the private sector.

RBA Cash Rate chart3
RBA Cash Rate chart3

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.