Tomorrow's Macro Roadmap: UK June Inflation Report in Focus
Macro: The Big Picture
Wednesday's calendar is quiet and sits squarely in the shadow of Thursday's European Central Bank decision, with the Governing Council in its pre-meeting quiet period and no policymakers scheduled. The one first-tier release is the United Kingdom's June inflation report at 08:00 CET, the last CPI print the market sees before the Bank of England meets on 30 July. The overnight session belongs to Japan, where the June trade balance lands at 01:50 CET into the same morning as a 40-year JGB auction, in the run-up to the Bank of Japan's 30-31 July decision. The US afternoon is all but empty of data, with the Federal Reserve inside its pre-FOMC blackout ahead of the 28-29 July meeting. The one event worth the screen time is a 13-billion-dollar 20-year Treasury auction at 19:00 CET, a clean read on appetite for the long end after soft June inflation took a July Fed move off the table. Oil and the US-Iran conflict remain the dominant macro swing factor beneath the data.
UK inflation is expected to make a fresh low in June as pump prices fall, but the read is temporary: every analyst we follow sees the annual rate turning back up towards 3 per cent later in the year, keeping the Bank of England's next move tilted towards a hike rather than a cut
The United Kingdom's June consumer price report is released at 08:00 CET. Economists surveyed by Bloomberg look for headline inflation to ease to 2.7% year-on-year from 2.8%, the median of 33 estimates running a tight 2.5 to 2.9% range (standard deviation just 0.08). Core is seen slipping to 2.5% from 2.6% (median of 28; range 2.3 to 2.6%), the monthly gain at 0.1%. The deceleration is almost entirely mechanical, driven by falling road fuel prices, which are feeding a softer energy contribution. The swing variable is services inflation, seen cooling to 3.5% from 3.7% (softer airfares a factor), below the Bank of England's roughly 3.6% projection for April. A soft services read would confirm a non-trivial undershoot of the Bank's own central forecast and mark a third consecutive downside-leaning report. For context, the Bank's latest forecast still had inflation rising. The April Monetary Policy Report projected CPI at 3.1% in the second quarter and 3.3% in the third, energy- and food-driven, higher still in the fourth quarter, before returning to the 2% target over the medium term. A 2.7% June print would sit about 0.4 point below the Bank's second-quarter modal projection (and 0.6 below its third-quarter path), underlining the undershoot of the Bank's own central forecast, even as the MPC still expects the energy-driven climb to resume later in the year. Underneath the headline the split the Bank cares about is stark: goods inflation has fallen back to around 2%, while services stay sticky near 3.5% and core goods are firm enough to partly offset the services cooling. That goods-versus-services divergence, not the fuel-led headline, is what the Monetary Policy Committee reads, and it is why a soft print that leaves services elevated would still be treated as hawkish. The read-through is asymmetric and forward-looking. A benign June print offers only limited comfort because natural-gas futures now sit some way above the levels the Bank assumed in April, pointing to higher household energy tariffs in the fourth quarter and a path back above 3% through the rest of the year. That makes an upside surprise in core or services, rather than the well-anchored headline, the scenario that could lift front-end gilt yields and sterling, one day before the ECB.
Editor's Note: Bloomberg's survey is unusually tight (SD 0.08, 33 economists), so 2.7% headline / 2.5% core. Sterling OIS now prices the next move as a hike: ~9% for a 25bp hike on 30 July, ~1 hike by November, ~2.5 by mid-2027 (Bank Rate 3.75% -> ~4.35%).