Let's get straight into details and what can we expect from the respective policy meetings this week.
RBA - Not one for change
With Australian inflation still holding well above the RBA's threshold range, don't expect much fireworks from the decision this week. The central bank is expected to keep the bank rate unchanged. And the language in the statement is very much to remain as per the May meeting here.
Although markets are still seeing lingering risks of a rate hike with the RBA, they aren't likely to lean towards that direction unless inflation stays much more stubborn in the months ahead. As such, the RBA is likely to keep their options open and stick with the forward guidance of "not ruling anything in or out".
In terms of market pricing, traders are not pricing in any major changes all the way through until November for now. So, the aussie might not have much to work with barring any surprises from the RBA.
SNB - Once again, the propensity to surprise
The SNB surprised with a rate cut in Q1 here and they could surprise again with their policy decision this week. Although traders are largely anticipating another rate cut to follow, it might not be the case. Personally, I think the decision is closer to a coin flip rather than favouring a rate cut.
As an aside, the market pricing is implying a ~72% probability of the SNB cutting rates on Thursday.
The latest inflation report here is still an argument for the SNB to cut further but there is a caveat. Services inflation rose to 2.2% and Jordan was explicit in warning that a weaker franc is the most likely source of inflation now. Adding to that, the latest sight deposits data also suggest that the SNB might be intervening to prop up the franc in recent weeks.
So, if the SNB isn't too comfortable with inflation risks, they could very easily just choose to not cut rates this week.
As such, I'd view the balance of risks to be for a higher Swiss franc. And that includes even if they do cut rates on Thursday. Considering the political climate in Europe, safety flows are likely to help underpin the franc in the short-term. So, the call would be to fade any overstretched EUR/CHF upside on the SNB this week.
BOE - A nothing burger or laying the ground work for after the summer?
This time last month, some had the June meeting pinned for when the BOE would start cutting rates. But hopes for that were dashed after the April CPI report here. In that lieu, we will be getting the May CPI report on Wednesday but it won't change anything on what we should expect from the BOE this week.
The central bank is not going to cut rates and will be expected to maintain their current policy stance mostly.
The thing to watch out for will be whether or not they will begin teeing up a move for August. Policymakers had previously said that they were comfortable with markets pricing in such a move but traders are erring to the side of caution for now. A softer set of inflation numbers might bring August back on the table. But for now, traders are still having some reservations.
The market pricing implies a ~45% probability for a move in August, with September being more assuring at ~89%.
The bank rate vote is also one to be mindful of. However, it is expected that it will remain the same at 7-2. The two dissenters, being Ramsden and Dhingra, are still anticipated to vote for an immediate 25 bps rate cut.
If the BOE maintains its language and reiterates that policy needs to remain "restrictive for an extended period of time", that will keep traders skeptical for a move in August. That especially if accompanied by stronger price pressures in the inflation data this week.
It would not be prudent for them to explicitly tee up a rate cut for August, but they could offer some subtle hints on that. We'll see. But of course, that needs approval first from the May inflation data. Otherwise, one can safely rule out such a move for the BOE.
The way I see it, the UK CPI report this week might just steal the spotlight and we're left with a nothing burger on Thursday. That unless the figures are softer than estimated.
Headline annual inflation is expected to fall back to the BOE's target of 2% in May. That said, core annual inflation remains closer to 4% as per the April reading. Meanwhile, services inflation is still extremely stubborn and has been a thorn for the BOE in delivering further progress on policy. So, that remains a key spot to watch.