Key FX risk events for June

By Giles Coghlan, Chief Currency Analyst at HYCM

Below are some key event risks to be looking out for in June.

1. ECB rate meeting this week on June 04. The expectations are that there will be an expansion of the Pandemic Emergency Purchase Program (PEPP). According to Pictet’s Frederik Ducrozet research note, the Governing Council will increase the PEPP by €500 to EU1.2trillion and further extend the program out until September 2021. There is potential for volatility and a surprise here, so watch out for euro volatility on Thursday.

2. EU summit meeting June 19. The euro has extended gains from last week after the European Commission mobilised €750bln for the European Recovery Fund, increasing it from €500bln. However, the euro gains have been due to the difficulty to get all 27 member states to agree to the German-Franco proposal. The recovery fund will be discussed at the summit and Merkel has said that she doesn’t expect leaders endorsement at the summit and recognises that negotiations won’t be easy. The so-called ‘frugal four’ (Austria, Denmark, Netherlands, and Sweden) will be hard to swing around as they are opposed to the idea of grants to member states. They would prefer low-interest loans. However, any consensus here and the EUR will benefit.

3. Brexit – Another deadline looms as the dark clouds approach! The end of June is the deadline for any extensions to the transition agreement and the general backdrop is that both sides are settling in for a hard Brexit. Expect more GBP volatility if no trade deal or extension can be agreed upon.

4. US Presidential campaign. Although the elections are still around 5 months away campaigns are starting to get underway. Arguably they already have with President Trump increasing tensions with China and targeting social media platforms with an executive order, but avoiding an all-out conflict.

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