Market Commentary: Thursday 20th June
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Overnight Chinese banks maintained their benchmark lending rate for a 10th month straight. The one-year loan prime rate was kept at 3.45%, according to a statement from the People’s Bank of China and the five-year rate, a reference for long-term loans including mortgages, stayed at 3.95%. As for the day ahead, Central Banks will be the focus as we hear from the SNB, Norges and Bank of England.
Domestically, the BoE should be 7-2, showing exactly the same vote split as May. The BoE is unlikely to want to say or do anything that draws attention to itself in the middle of the general election process. The easiest option is for each member to repeat their prior vote. While calls for an imminent rate cut will grow, given headline CPI’s descent to 2%, there’s likely to be growing concerns around the stickiness surrounding services inflation. An August rate cut is not a done deal but yesterday's CPI number report will enable a summer rate cut, possibly pushed to September. The SNB announcement is at 08.30 and is the more interesting of the 3 CBs, they cut in March and another cut is seen as 50-50 after steady March inflation data, too close to call.
Data wise, after yesterday's Juneteenth Holiday we get US housing starts, Building Permits and initial jobless claims. The markets have been subdued but the yield on 10-year Treasuries advanced three basis points to 4.25%, West Texas Intermediate crude fell 0.2% to $81.41 a barrel and Spot gold rose 0.6% to $2,342 an ounce. In the currency markets USDJPY opens at 158.10 nudging towards 160, EURUSD 1.0735 and GBPUSD at 1.2705.
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