Market Update

Following last week's surprising 'dot plot' revelation by the US central bank, this week's focus shifted to the UK monetary policy meeting and the US Personal Consumption Expenditure (PCE) reading.
Fortunately, the hawkish stance of the Federal Reserve was not mirrored by policymakers at the Bank of England (BoE). The BoE decided to keep both interest rates and its asset-purchase (Quantitative Easing - QE) target unchanged at £875 billion.
What's even more reassuring is the consensus among policymakers, even if it wasn't unanimous. With a voting margin of 8-1, the only dissenting vote came from the outgoing member, Andy Haldane. Considering Haldane's departure from the BoE, it's conceivable that the next vote will be unanimous at the BoE's upcoming meeting on Thursday, August 5, 2021.
This voting alignment is indicative of policymakers' lack of urgency in raising UK interest rates, demonstrating their belief that current inflation is temporary. This cautious approach is sensible, given the uncertainties surrounding the conclusion of the job-retention (furlough) scheme in September, potential increases in unemployment, UK/EU trade tensions, and the recent resurgence in coronavirus infections.
Regarding the US PCE, the Fed's preferred inflation measure, it experienced inflation primarily due to base effects. While the year-on-year increase met economist expectations at 3.4%, the month-on-month increase fell slightly short at 0.5% compared to the expected 0.6%. This development is highly favorable for global equity markets, as it suggests that inflation remains under control, and any increase in US interest rates remains distant. Consequently, equity markets rebounded, recovering losses from the previous week.
Looking ahead, this week's economic calendar is relatively quiet. Of particular interest will be the US unemployment data scheduled for Friday, July 2, 2021. This report includes non-farm payrolls, the unemployment rate, the participation rate, and average earnings. Given the long Independence Day holiday weekend in the US, this data release is significant.
Other data releases to watch include US Institute for Supply Management (ISM) data, US and Eurozone consumer confidence reports, Eurozone Consumer Price Index (CPI) inflation data, Japanese industrial production figures, and Chinese Purchasing Managers' Index (PMI). Additionally, an OPEC meeting is on the horizon, and considering the price of a barrel of Brent crude oil is hovering just above pre-coronavirus levels at $75, the coalition may decide to increase supplies, which could help alleviate concerns about inflation.