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Week Ahead (20 June)

Monday, 20 June – French politics enters a new era, following loss of absolute majority by Ensemble coalition

President Macron’s centrist ‘Ensemble’ alliance, were deprived of their absolute majority in the national assembly, following the second round of legislative elections held yesterday. The left-wing NUPES under Jean-Luc Melenchon, demonstrated remarkable gains, becoming the main opposition force with 131 seats. The far-right led by Marine Le Pen also made significant gains, increasing its number of deputies tenfold.

The markets are not particularly fond of ‘cohabitation’, as with the rise of Eurosceptic forces and Macron’s loss of the absolute majority, the National Assembly could enter a period of prolonged political uncertainty, facing the prospects of legislative gridlock. In the absence of a parliamentary majority, Macron’s reform agenda, particularly the controversial pension reform, will likely need to be amended and watered down if it is to pass through parliament.

Wednesday, 22 June – UK Office of National Statistics to release inflation data for June 2022

This Wednesday, the UK Office of National Statistics will release inflation data for June. In April, inflation in the UK hit a 40-year high, at 9%. Last Thursday, the Bank of England (BoE) adjusted its forecast and now expects inflation to rise slightly above 11% by October. Seeking to counter this, the Bank also raised interest rates by 0.25% to 11.25% - the fifth interest rate rise since December 2021.

As noted by the BoE, not all inflationary pressures can be attributed to global events. Consumer services price inflation, which is more influenced by domestic costs than goods price inflation, has strengthened in recent months. In addition, core consumer goods price inflation at 8% is significantly higher in the United Kingdom than in the euro area (3.8%) and in the United States (6.4%). The ONS numbers for June are likely to reflect this and overall inflation is expected to be in excess of 9%.

Thursday, 23 June – By-elections to take place in Tiverton & Honiton (Devon) and Wakefield (West Yorkshire)

After surviving a vote of no confidence earlier this month with an underwhelming level of support (211 MPs), the pressure on Boris Johnson is likely to intensify in the event of bad results in by-elections in Tiverton & Honiton and Wakefield on 23 June. Tiverton & Honiton is considered a Conservative stronghold in the country. However, recent polls suggest that the Conservative party could lose its seat to the Liberal Democrats. Furthermore, Wakefield’s seat is projected to be returned to the Labour party.

Johnson also faces the prospect of further by-elections in short order, as one Conservative MP has been arrested on suspicion of rape, while MP Alok Sharma is running to head the UN’s climate division.

Thursday, 23 and Friday, 24 June – European Council to discuss Ukraine’s EU candidacy bid

On 23-24 June, the European Council will meet discuss inter alia the ongoing war in Ukraine. Ukraine’s application to become a candidate for EU membership will be the key point on the agenda, following a positive recommendation by the European Commission published last Friday. Last Thursday, the leaders of France, Germany, Italy, and Romania reiterated their support for Kyiv’s bid to become an accession candidate. At the upcoming summit, EU leaders are expected to outline specific conditions for reforms on democratisation and rule of law that will have to be met in the accession process.

Friday, 24 June – Spain's Q1 GDP figures to be published on Friday

On Friday, Spain’s GDP figures for the first quarter of 2022 will be published. The Bank of Spain recently lowered its economic growth forecast for the full year to 4.1% from 4.5%. The figures will be published in the aftermath of the regional elections in Andalusia that saw the centre-right People’s Party (PP) achieving a landslide victory and securing an absolute majority.

The region is considered a longstanding stronghold of the Socialist Workers’ Party (PSOE). Andalusia, home to 8.5 million people, is Spain’s most populous region and could serve as an indication of how the rest of the country will vote, ahead of the general election in 2023.

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