Week Ahead – US inflation data the headline, BoC ponders another hike, possible RBNZ pause

US

This week is all about inflation. Annual inflation will tumble as energy prices drop and due to base effects,  but many traders will pay close attention to the core readings. CPI on a monthly basis is expected to increase by 0.3%, higher than May’s pace of 0.1%.  The headline annual reading is expected to fall from 4.0% to 3.0%.  The monthly core reading is expected to rise 0.3%, while the year-over-year reading softens to 5.0%. Expectations are for pricing pressures to edge higher going forward.  

The upcoming week is filled with Fed speakers and the Wednesday release of the Beige Book. On Monday, we hear from Barr on bank supervision, Daly talks about inflation and banking, and Mester discusses the economic and policy outlook.  Wednesday contains appearances by Barkin, who talks about inflation, Kashkari discusses monetary policy, Bostic attends the Atlanta Fed payments event, and Mester speaks on FedNow. The recent flow of economic data may warrant steady hawkish Fed speak.  

Eurozone

Not the most thrilling of weeks, dominated by tier two and three economic data. The standout is probably the ECB accounts, although I’m not sure there’ll be anything overly surprising in them. ZEW surveys, final inflation readings, and new EU economic forecasts are also notable but may not move the needle when it comes to economic or interest rate expectations.

UK 

Next week offers a selection of economic data, the most notable being the labor market report on Tuesday. Better data seems to be appearing everywhere but the UK at the moment and BoE policymakers will be hoping the jobs data brings some overdue good news, being more modest wage growth and signs of an overheated labor market cooling. No doubt BoE Governor Andrew Bailey will comment on this in his numerous appearances throughout the week. We’ll also get an update on the resilience of the economy with GDP data on Tuesday and Thursday, the latter being the official release.

Russia

Inflation data on Wednesday is expected to show pressures heating up which may explain why the CBR has been hinting that the next interest rate move may be higher rather than lower. The extent to which the CPI number rises will likely determine the urgency with which the central bank will respond. The rouble remains under pressure and rate hikes may help to address both problems.

South Africa

No major economic data or events next week. Manufacturing production and the business confidence survey are the only notable releases.

Turkey

The lira remains under immense pressure after the government abandoned its unsustainable and unconventional policy of monetary easing and market interventions, which triggered an enormous spike in inflation. Inflation eased slightly last month but that won’t likely last as the currency has fallen to new record lows. Data next week include unemployment, industrial production, and current account. 

Switzerland

No major releases or events next week, with PPI on Friday as the only thing on the calendar. 

China

Several key data and events to watch for this week. On the geopolitical front, US Treasury Yellen has kick-started her official visit to China and will be meeting top Chinese officials over the weekend, 8 July to 9 July. Market participants will be watching for signs of whether there will be progress made between the US and China in finding areas of common economic ground and opening communication channels for further dialogue amid a still frosty relationship between them over the current “tech war”.

On Monday, inflation and producers’ prices data for June will be out and the consensus is set for a continuation of lackluster readings. Consumer inflation is expected to come in at 0.2% year-on-year, unchanged from 0.2% in April, a 26-month low. On the other hand, producers’ prices are expected to slip further to -5% year-on-year from -4.6% in May. If it turns out as expected, it will be the ninth consecutive month of contraction which increases the risk of a deflationary spiral in China.

On Tuesday, outstanding loan growth together with M2 money supply data will be released. Loan growth is expected to inch slightly lower to 11.2% year-on-year in June from 11.4% in May; its weakest pace of increase since January 2023.

On Thursday, the balance of trade for June will be out to gauge the latest conditions in external and internal demand. Exports growth is forecasted to shrink at a lesser magnitude of -3.1% year-on-year from -7.5% in May, a three-month low. Imports growth is forecasted to decline at a lesser rate of -2 % year-on-year from -4.5% in May. If it turns out as forecasted, it will be the fourth consecutive month of falling purchases, signaling the continuation of a weak domestic demand environment.

India

Out on Wednesday, consumer inflation for June is forecasted to dip slightly to 4.1% year-on-year from 4.25% in May, the lowest level of growth since April 2021. On a month-on-month basis, consumer inflation is forecasted to inch lower to 0.3% from 0.51% in May.

Wholesale inflation for June will be released on the following day and are forecast to drop further to -3.7% year-on-year from -3.48% in May. If it turns out as expected, it will be the third consecutive month of contraction.

To wrap up the week, the balance of trade for June will be out on Friday.

Australia

Two key soft data will be out on Tuesday; Westpac consumer confidence is expected to rise further to 3.2% month-on-month for July from 0.2% recorded in June. In contrast, the NAB Business Confidence for June is forecasted to deteriorate further to -6 from -4 in May.  

Consumer inflation expectations for Jul will be released on Thursday, it is expected to dip slightly to 4.9% from 5.2% in June.

New Zealand

The RBNZ monetary policy decision is on Wednesday, with no change expected after the central bank hiked its official cash rate for the 12th consecutive time in May. This took it to 5.5%, its highest level since December 2008. 

Japan

Out on Monday, the current account surplus for May is expected to shrink slightly to JPY1,884.5 billion from JPY1,895.1 billion in April. Bank lending for June is forecasted to drop to 1.6% year-on-year from 3.4% in May.

Eco Watchers Survey, a gauge for Japan’s service sector sentiment is forecasted to improve further to 56 in June from 55 recorded in May, its highest reading since December 2021. If it turns out as expected, it will be the fifth consecutive month of increases for service sector sentiment.

Machinery orders for May will be released on Wednesday. The consensus is expecting a reduction in growth decline to -0.2% year-on-year from -5.9% in April.

Singapore

Flash Q2 GDP will be out on Friday; some forecasters are calling for a technical recession where -0.2% is being forecasted on a quarter-on-quarter basis for Q2. If it turns out as expected, it will be the second consecutive quarter of negative growth after Q1’s reading of -0.7% q/q.

On a year-on-year basis, Q2 GDP is forecast to come in lower at 0.1% from 0.4% recorded in Q1.  

Economic Calendar

Saturday, July 8

Economic Events

US Treasury Secretary Yellen is in China through Sunday for meetings with senior government officials

Monetary Authority of Singapore to name Deputy Prime Minister Wong as central bank chair

ASEAN foreign ministers and their counterparts from the US, China, Russia, and other key partners

Sunday, July 9

Economic Data/Events

China aggregate financing, money supply, new yuan loans

US President Joe Biden attends 74th NATO summit

ECB policymakers Villeroy, Centeno, and de Cos, plus Bank of England Governor Bailey speak at Les Rencontres Economiques d’Aix-en-Provence 2023 conference

Australian Conference of Economists in Brisbane through Wednesday

Monday, July 10

Economic Data/Events

China CPI, PPI

Japan balance of payments

New Zealand home sales

Singapore GDP

US wholesale inventories

Fed’s Daly to discuss inflation and bank supervision at Brookings Institution event

Fed’s Mester speaks on the economic and policy outlook at a virtual event hosted by the University of California at San Diego

Fed’s Bostic speaks at the Cobb Chamber of Commerce

Fed’s Barr in a discussion at Bipartisan Policy Center about bank supervision, regulation, and new capital requirements

BOE Governor Bailey delivers speech at Financial and Professional Services Dinner

Riksbank releases minutes from June 28 meeting

German Chancellor Scholz, Australia’s Prime Minister Albanese joint news conference

Tuesday, July 11

Economic Data/Events

Australia consumer confidence

Germany CPI, ZEW survey expectations

Italy industrial production

Japan money stock, machine tool orders

Mexico international reserves

South Africa manufacturing production

Turkey current account

UK jobless claims, unemployment

Fed’s Bullard speaks at National Association for Business Economics meeting

NATO holds its annual summit

Wednesday, July 12

Economic Data/Events

US CPI

Canada rate decision: Expected to raise rates by 25bps to 5.00%

India CPI, industrial production

Japan PPI, machinery orders

Mexico industrial production

New Zealand rate decision

Russia CPI

Spain CPI

Turkey industrial production

US President Biden visits Helsinki for a US-Nordic summit  

US Federal Reserve issues Beige Book regional economic survey

ECB’s Vujcic speaks on monetary policy and euro-area outlook

ECB chief economist Lane and Fed’s Kashkari speak on a panel about banking solvency and monetary policy at the National Bureau of Economic Research Summer Institute 2023 event  

Fed’s Mester speaks about FedNow at the NBER event

Fed’s Bostic speaks at the bank’s 2023 Payments Inclusion Forum

White House economic adviser Brainard to address the Economic Club of New York

BOE Governor Bailey at a news conference on results of financial stability report and stress tests of UK banking system

BOE’s Breeden and Foulger brief on the stability report

RBA Gov Lowe to speak at an event in conjunction with the Australian Conference of Economists in Brisbane

Far East Grain Forum 2023 in Vladivostok, Russia

Thursday, July 13

Economic Data/Events

US initial jobless claims, PPI

China trade

Eurozone industrial production

France CPI

Israel trade

New Zealand food prices, manufacturing PMI

UK industrial production

French President Emmanuel Macron hosts Indian PM Narendra Modi

EU-Japan Summit in Brussels with an appearance from Japanese PM Kishida

French President Macron hosts Indian PM Modi at dinner in Paris

Friday, July 14

Economic Data/Events

US University of Michigan consumer sentiment

Bank Earnings from JPMorgan, Citigroup, and Wells Fargo

Canada existing home sales

India trade, wholesale prices

Italy trade

Japan industrial production

Poland CPI

Thailand foreign reserves

G20 finance ministers and central bank governors meet in India

Sovereign Rating Updates

EFSF (Fitch)

ESM (Fitch)

Ireland (Fitch)

Spain (Moody’s)

Iceland (Moody’s)

Austria (DBRS)

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