By James Langton

(June 23) – As the first week of summer comes to a close, analysts are turning their attention to next week’s meeting of the U.S. Federal Reserve’s Open Market Committee. The general consensus is that the committee will back on its aggressive stance on interest rate hikes. Most likely, they predict, interest rates will remain unchanged in light of economic data released in recent weeks indicating a slowing U.S. economy.

The FOMC meeting begins June 27. A rate announcement, one way or the other is expected mid-afternoon on June 28.

BMO Nesbitt Burns warns that a 25 basis point hike can’t be entirely ruled out, but markets aren’t expecting it. Neither are RBC Dominion Securities or CIBC World Markets. However, if the Fed does hike rates, BMO Nesbitt predicts that the Bank of Canada would follow suit. RBCDS concurs, suggesting that failing to do so would mean gutting the loonie.

BMO Nesbitt expects the Fed to talk tough though, suggesting it isn’t entirely sold on the slowdown. Neither will the Fed hesitate to pull the trigger on further hikes if necessary. CIBC reminds investors that although the numbers do indicate slowing, economic data must not be believed on the basis the number of a single month.

Apart from the rate decision, next week’s big number in Canada is Friday’s GDP at factor cost. Economists are anticipating a slight drop in the number.

In the U.S., May’s durable goods report will provide the big number. But against the Fed it will largely be ignored.

BMO Nesbitt is reminding clients that the Mexican election is also on the near horizon, set for July 2. With a tight race brewing it warns “a close vote would represent a significant risk for the currency.”