22 June 2018
Key events in developed markets next week

Trade tensions to remain high in the US while the ECB will be focusing on Eurozone inflation and German IFOs. But what else is going on in developed markets next week?

Strong US consumer confidence but trade tensions remain high

Trade tensions remain high with President Trump threatening another round of tariffs on Chinese products imported into the US. China is not backing down, leading to growing worries about an intensifying situation that threatens global growth. Home builders are already warning about the higher costs from tariffs on lumber and other materials, and we suspect more industries will soon be vocalising their fears about the risks from a trade war. At this stage, we seem a considerable distance from an agreement that can calm market nerves.

The data calendar remains light with the main focus being housing data and consumer confidence. For now, demand and sentiment remain strong, boosted by record employment levels and growing signs of wage pressures. We will also be looking out for comments from Federal Reserve officials. The latest Fed forecasts suggest a growing appetite for two further rate rises this year, which we also expect will happen.

Key events in EMEA and Latam next week

Expect a fair bit of data in EMEA and Latam next week but our main focus will be the Czech central bank

Czech central bank to hike

Due to a significantly weaker Czech koruna and pro-inflationary risks stemming from strong wage dynamics, we expect the Czech National bank (CNB) to deliver a 25bp hike next week.

The CNB had expected EUR/CZK to be at 25.2 on average in 2Q18; however, in reality, it looks as if it will be 25.6 which means the koruna is more than 1.5% weaker versus the euro. Assuming the Bank's rule of thumb, that 1% Czech koruna appreciation is equal to a 25bp hike, then one-and-a-half to two interest rate hikes seem to be missing at the end of June.

Given its transparent forward guidance to tighten monetary conditions, the weak koruna allows the central bank to deliver a much-needed hike. 

The ECB’s decision to provide forward guidance on stable deposit rates until summer 2019 is not a game changer for the CNB. The sensitivity of the koruna to rising interest rate differentials has significantly declined due to the one-way positioning after the end of the FX-floor regime, enabling the CNB to make its monetary decision much more independently of the ECB.

Asia week ahead: Spotlight on Indonesia’s central bank

Expect Indonesia's central bank to hike rates by another 25bp to stem the rupiah's weakness. The other highlights include manufacturing releases for May from Korea, Singapore, Taiwan and Thailand

Bank Indonesia to tighten policy ... again

Bank Indonesia’s monetary policy meeting is the key highlight of the week ahead. 

Financial stability will be the main focus of the meeting as an escalation of global trade tensions keep domestic financial assets and the rupiah (IDR) under a weakening pressure. Following its Philippine counterpart, BI moved to tighten policy in May and raised interest rates by a total 50bp, two 25bp moves taking the main policy rate to 4.75%. Alas, the hikes did little to stem the currency weakness in both countries. Philippine's central bank raised rates by another 25bp this week, and we expect Bank Indonesia to follow suit next week.

On a positive note, however, Indonesia’s trade data for May due next week is likely to show a swing in the trade balance to surplus from a deficit. A swing to about $1bn surplus in May from $1.6bn deficit in the previous month is what we anticipate, should bring some life into the currency.

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Our view on next week’s key events

Discover what ING analysts are looking for next week in our global economic calendars

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