- June 5, 2026
- Posted by: EWGFX
- Category: news
Bohan Zhang and Kohei Takahara, economists at Sumitomo Mitsui Banking Corporation: The ECB meeting will be held next week on the 10th–11th, followed by key central bank policy meetings in major economies the week after—namely, the Bank of Japan (June 15–16), the FOMC (June 16–17), and the Bank of England (June 18)—making the ECB’s decision the first among these. Financial markets widely expect a 25 basis point rate hike at the ECB meeting. Against this backdrop, we re-examine current conditions in the euro area. On June 2, the May Harmonized Index of Consumer Prices (HICP) for the euro area was released, showing headline inflation accelerating to +3.2% year-over-year from April’s +3.0%. Core inflation, excluding energy and food, also rose to +2.5% from +2.2% in April. This confirms that upward price pressures—driven not only by direct increases in energy-related prices due to higher crude oil costs but also by broader underlying inflation—are supporting further ECB rate hikes.
On the other hand, economic activity appears weak: the revised euro area composite PMI, published on June 3, fell to 48.5—the lowest level since late 2024. Moreover, in its Spring 2024 Economic Forecast released on May 21, the European Commission lowered its real GDP growth projection for the euro area in 2026 to +0.9%, down by 0.3 percentage points from its previous forecast (released in November 2025), citing elevated energy prices stemming from geopolitical tensions in the Middle East. Amid this mix of upside inflationary pressures and downside risks to growth, as noted in last week’s report, we do not anticipate that the ECB will implement large-scale or rapid rate hikes going forward. Consequently, in foreign exchange markets, we expect limited room for EUR/USD appreciation from a monetary policy perspective.
In addition, the U.S. is scheduled to release May CPI and PPI data next week. According to the Beige Book published on June 3 (with a data cutoff date of May 27), ‘Prices overall rose at a moderate to strong pace, with most districts reporting higher inflation than in the previous report,’ and ‘energy-related cost increases have spilled over into transportation, packaging, food, and fertilizers,’ indicating broad-based inflationary pressures in the U.S. economy through May. Should stronger-than-expected price pressures emerge across both upstream (PPI) and downstream (CPI) indicators, markets would likely price in additional Fed rate hikes, favoring USD strength. However, for USD/JPY, upside momentum remains capped near the JPY 160 level due to heightened intervention concerns. With ongoing monitoring of Middle East developments, we expect the pair to continue trading within a well-defined range.
[Expected USD/JPY Range for Next Week] 158.00 – 161.00 (End)
This article is provided by Sumitomo Mitsui Banking Corporation.