Key highlights of the week ended June 20

Source: Dukascopy Bank SA
Euro zone
The Euro zone inflation returned firmly to green territory in May, as the ECB's quantitative easing programme has started to produce desired results. Euro area's annual inflation came in at 0.3% in May 2015, up from 0.0% in the preceding month. On a monthly basis, prices in the bloc climbed 0.2%, after flat growth seen in April. Despite some relief, the headline inflation has remained in what the European Central Bank calls the 'danger zone', below 1% since October 2013, that is, for 20 consecutive months.

US
Referring to an improving economy, the Fed signalled that it is on track to hike all-time low interest rates as early as September. Yet, the rates are likely to rise more gradually than it was previously thought. While the economy heads a 2% growth this year, concerns remain over the recovery of the nation's labour market, low labour force participation rate and high level of part-time employment. The Fed also downgraded its US economy's growth outlook, stating that gross domestic product of the world's number one economy is poised to expand between 1.8% and 2.0% in 2015, compared with the central bank's March forecast of between 2.3% and 2.7%. In addition to that, policy makers expect the unemployment rate to be slightly higher at the end of the year at 5.2% to 5.3% compared with the previous estimate.

UK
British inflation turned positive again in May after sliding below zero in the preceding month for the first time in 55 years. Consumer prices rose 0.1% in May from a year earlier, following the 0.1% decline in April. Measured on a monthly basis, UK inflation edged higher 0.2%, according to the Office for National Statistics. An upward pressure on prices in May came from a rebound in air fares, which dragged down inflation in April on the different timing of the Easter holidays in 2015 and 2014. Bank of England Governor Mark Carney previously said inflation was likely to rebound as sharp plunge in global oil prices last year worked itself out of the figures, and that the UK was not threatened by a devastating period of deflation.

Australia
The RBA will continue thoroughly monitor economic developments in the coming months to assess whether further monetary policy stimulus are needed, as economic growth and business investment remains weak. The central bank cut its official cash rate to an all-time low of 2% in May, before keeping rates on hold at its June 2 gathering. The RBA said monetary policy should remain "accommodative" in the light of the current domestic and international economic environment.In the minutes, the central bank pointed to "output growth" as a key area of concern influencing monetary policy, saying it was forecasted to continue below trend until late 2016. It also underscored spare capacity in labour and product markets, as well as weak business investment. The central bank also reiterated the need for further currency depreciation to balance economic growth. Market participants are pricing in 15 basis points of rate cuts in the next 12 months, or less than a quarter-point reduction.

Switzerland
The Swiss National Bank kept intact its policy of negative interest rates and penalties for holding Swiss francs in cash. The central bank anticipates that negative interest rates will dampen the value of the Swiss Franc over time, the SNB Chairman Thomas Jordan said. In addition to that, the central bank also said that it would remain active in currency markets to suppress Switzerland's currency.

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