Fed remains in focus

I talked last week whether June was going to turn into September (of last year), when we saw strong expectations of Fed tightening ultimately disappointed by the hike that never came that month. That theme is likely to remain in place this week, with FOMC Chair Yellen speaking Friday, although this is less a prepared speech so it may not be the place for pointed references to the June meeting. We’ll have to see. Ahead of that, the preliminary PMI data for the Eurozone has so far fallen to the firmer side of expectations overall. One month to the EU membership referendum, the shift in the polls and betting markets appears to be towards the ‘remain’ camp, although not by a margin sufficient enough for investors to breathe a sigh of relief. Sterling performed well last week, helped by this shift, but also by some better than expected data on the economy. Cable has a tough battle to push decisively above the 1.45 level, given the building tightening expectation ahead of the June meeting. Note that BoE Governor Carney appears before the Parliamentary Treasury Committee tomorrow, so we could see some further headlines on the issue.

The meeting of G7 finance ministers and central bank governors saw no official statement and with it, no specific reference to currencies. If there was any sense to be gained, it was that differences remain, as well as risks to the global economy, but there is little consensus on how to approach them. Finally, positive news on Greece over the weekend, with austerity measures agreed. We may just avoid a Greek crisis this summer…