Things really start to spice up this week with major central bank meetings, (and rate cuts!), as well as top tier economic data releases. Markets breathed a sigh of relief over the moderately cooler US inflation data released on Friday. We are into checking out decimal places on PCE data these days though, so price action has been inevitably mixed in recent weeks.

The dollar saw its run of four straight months of gains halted in May as other central banks, like the BoE and the Antipodeans, were forced to rein in their rate cut expectations on the back of sticky inflation. Attention will turn to the monthly US payrolls report on Friday which should show that labour demand and supply are in better balance. Indeed, a downside surprise could be on the cards if the data finally follows other measures of employment like the ISM labour components. Benign wage growth could also turn the odds of a Fed September rate cut, which are currently a coin flip. We also get fresh ISM survey data through the week.

The ECB will cut rates on Thursday, but then likely step away from backing a series of reductions. There’s a 60% chance of another move in September but we would bet the house on hearing “data dependent”, perhaps several times during the Lagarde press conference. Inflation has ticked up recently while growth too has bottomed out, so policymakers will want to be as flexible as possible going into the summer. The euro should break 1.09 with a very “hawkish” rate cut.

The Bank of Canada meeting is more uncertain in terms of a rate move. Consensus is split but unemployment has risen, inflation has fallen into the bank’s 1% – 3% and growth has been sluggish. Policymakers may also not want to signal that more rate cuts are coming, especially due to the Fed prolonged delay. This could help the loonie, but only in the short term as there is wide room for an eventual dovish BoC repricing. This potential underperformance could run especially true versus other commodity currencies, if US data starts to cool further.