Published: 28/06/2022 By ECAP
Sterling continues to trade in line with risk assets, however, and benefitted from the recovery in world stock markets last week. This week we will pay close attention to consumer credit; our view that consumers will prove resilient to the squeeze in real incomes by drawing down on savings accumulated during the pandemic will be tested. May inflation in the UK hit yet another multi-decade record, though the core index that strips out the more volatile food and energy components provided a tenuous silver lining, coming under expectations just below 6%. Last week’s business activity PMIs actually held up relatively well, with the composite index unchanged at 53.1 in June, albeit a drop in the business expectations component suggests a slowdown in the index is likely on the way.The Swiss franc was the best-performing major currency last week. EURCHF ended the week around the 1.01 level, having briefly fallen to its lowest level since March. In addition to a recent hawkish turnaround from the Swiss National Bank, the currency was also supported by a sharp decline in yields on both sides of the Atlantic. SNB president Jordan reiterated the message from the last policy meeting on Wednesday, suggesting that interest rates will likely need to be raised further at upcoming meetings. The bank’s change of approach has been reflected in the latest sight deposit data. In the past five weeks, this indicator posted declines, suggesting that the bank was not intervening in order to weaken the currency. A number of macroeconomic readings from Switzerland will be out this week, on the forward-looking indicators, especially the KOF leading indicator (Thursday) and manufacturing PMI (Friday).