Week ahead: Bank of England rates, flash PMIs and the Fed aftermath

Lucy Harley-McKeown
·4 min read
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The London skyline at sunset as seen from Greenwich Park, London, showing skyscrapers in the City financial district. Wednesday could be the hottest day of the year so far as parts of the UK are set to bask in 30-degree heat. Picture date: Wednesday June 16, 2021. (Photo by Dominic Lipinski/PA Images via Getty Images)
The city will be watching for indications of new moves from the Bank of England. Photo: Dominic Lipinski/PA Images via Getty Images

In markets next week investors are due to be reading the tea leaves on what central banks might do, with several speeches on the slate from a number of different economies.

There's also still the spectre of coronavirus variants on the horizon and what any new moves on lockdowns might do to the UK economy, which is currently braced for the end of furlough.

Travel companies are still waiting for news on whether restrictions on travel are likely to be lifted in any meaningful way for the holiday season.

Markets are also set to digest a slew of new economic data across the eurozone — from consumer confidence to the temperature of manufacturing sector.

Eyes will also be on the cryptocurrency markets which has seen a tough week, with 'Big Short' investor Michael Burry warning that the "mother of all crashes" was pending, predicting a downturn in crypto and meme stocks.

UK: BoE rate chat, flash PMIs

Andy Haldane, Chief Economist, Bank of England giving evidence to the Treasury Select Committee. Picture date: Monday May 24, 2021. (Photo by House of Commons/PA Images via Getty Images)
Andy Haldane, Chief Economist, Bank of England. Photo: House of Commons/PA Images via Getty Images

The headline news coming out of the UK in financial markets next week will be an update on the Bank of England's interest rates path and asset purchase programme, expected on Thursday.

According to analysts at ING, markets have priced in two rate hikes by mid-2023, with the possibility of a hike later into 2022.

However, despite presumed action later in the year, the BoE is unlikely to make any sudden moves now, and has held back from putting its cards on the table for any concrete timings.

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UK central bankers have said they want to see significant progress on capacity before hiking anything.

ING has pencilled in a first rate move for 2023 but wouldn't rule out an earlier move, saying that it could be triggered by evidence of more sustained wage growth or an unwinding of household savings.

It's also Andy Haldane's last meeting as the bank's chief economist, meaning he could well go out with a bang. Over the course of his tenure at the bank he's been known for making bold economic calls on policy and has recently expressed concerns the economy might need a tap on the breaks to keep it in check.

There are also flash manufacturing and services PMIs on the horizon, which should give a read on an important part of the economy coming out of COVID lockdowns.

Watch: What is inflation and why does it matter?

EU: Ifo business climate, flash PMIs and ECB president to speak

Germany, Europe's biggest economy, has much to think about this week with a flash manufacturing and services PMI on the horizon as well as the closely-watched Ifo business climate reading.

Since the vaccination programme has gathered steam there are likely to be positive noises.

France and the Eurozone are also in for flash PMIs. Analysts expect to see improvements in these numbers in particular with services.

Consumer confidence numbers are on the slate too on Tuesday, an important read of the sentiment now vaccination programmes are picking up across the continent.

European Central Bank (ECB) president Christine Lagarde will add to the slew of central bank officials speaking this week, with an appearance on Monday.

US: More central bank updates and a slew of economic releases

A Wall St sign hangs at the New York Stock Exchange (NYSE) at Wall Street on March 23, 2021 in New York City. - Wall Street stocks were under pressure early ahead of congressional testimony from Federal Reserve Chief Jerome Powell as US Treasury bond yields continued to retreat. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

It's a week of central bank updates in the US too, with eight individual Federal reserve members stepping up to give the lay of the land. This includes an update from chair Jerome Powell.

Investors will be looking for the nuance in phrasing, after a hawkish shift in previous weeks on rates.

Last week, Powell said that the bank was considering tapering its purchases of Treasurys and mortgage securities. This would be the first serious reversal of policies put in place to add liquidity to markets when the economy shut down last year.

Scaling down purchases could lead to interest rate hikes which are now projected to take hold in 2023.

Alongside this there will be a read on the housing market, durable goods orders, personal income, spending and inflation data as well as flash manufacturing PMIs from Markit to keep investors busy.

Durable goods orders are set to remain on a strong path, however there's potentially a supply problem on the horizon meaning demand might not be met.

Watch: What are SPACs?

Elsewhere: Canadian retail sales data, the Bank of Japan's monetary policy minutes and a slow week for financial releases from companies.