The past week was eventful, marked by the Fed raising interest rates by 25bps, as expected. The post-meeting comments stressed a data-dependent approach to future decisions but avoided more details about future hikes. On Friday, the BoJ kept monetary policy unchanged but surprised the market by tweaking its YCC policy and allowing more flexibility while raising the trading band to +/- 1.0%.
Looking ahead to the upcoming week, there will be several key economic events. Monday will be quiet, but Tuesday all eyes will be on the RBA as they announce their monetary policy decisions. Additionally, the U.S. will release the final Manufacturing PMI, ISM Manufacturing PMI and JOLTS Job Openings data.
Moving on to Wednesday, New Zealand will report the employment change q/q and the unemployment rate. Meanwhile, in the U.S., the ADP Non-Farm Employment Change data will be released.
Thursday brings the CPI data for Switzerland, as well as OPEC-JMMC Meetings. For the U.K. it will also be an eventful day with the release of the BoE Monetary Policy Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, and a speech from BoE Gov Bailey. In the U.S., the focus will be on Unemployment Claims, final Services PMI and the ISM Services PMI.
Finally, on
Friday, Australia will present the RBA Monetary Policy Statement, Canada will
release the employment change and unemployment rate, and the U.S. will share
the average hourly earnings m/m, Non-Farm Employment Change, and the
unemployment rate.
Analysts hold split views on the RBA upcoming decision at Tuesday's meeting.
While some believe the Bank will keep its monetary policy unchanged, others,
like Westpac analyst Bill Evans, suggest a 25bps rate hike is possible.
Recent
inflation data for Australia indicated a cooling down, yet it remains elevated
compared to the RBA's target. This suggests that the current hiking cycle might
not have concluded yet. If the RBA decides to maintain its current monetary
policy at this week's meeting, it is likely that future rate increases will be
implemented until the end of the year. The y/y data currently sits at 6.0%,
which is below the 6.2% consensus. The RBA may choose to adopt a wait-and-see
approach to assess how the situation unfolds before implementing any further
hikes.
This week, the jobs report for New Zealand holds significant interest. Analysts
anticipate a 0.6% increase in employment, and the labour cost index is also
projected to rise by 1.2%. Moreover, there is an expectation for the
unemployment rate to climb slightly from 3.4% to 3.5%. These data points will
be closely monitored by the RBNZ, and if they align with the consensus, it is
unlikely to have a major impact on the Bank's future decisions.
On Wednesday, the ADP Non-farm Employment Change data is scheduled for release. Market consensus is for a decline from 497K to 195K. Typically, this report doesn't create much market volatility, but a significant deviation from the expected figure could bring about some fluctuations.
The
upcoming CPI data for Switzerland is expected to indicate a slowdown, given the
observed decline in prices in July. As a result, the SNB may feel less
compelled to raise interest rates at their next meeting in September. It's
worth noting that Switzerland's inflation is not as high as in other developed
countries. The consensus for the y/y data stands at 1.6%, aligning with the
SNB's target.
At this week's meeting, the BoE is expected to raise its interest rates, but
there is mixed opinion among analysts regarding the size of the hike. Some
suggest a 50bps increase, while others advocate for a more modest 25bps hike.
Despite a surprising decline in June, inflation data remains significantly
above the BoE's target, with y/y headline inflation now at 7.9% and core
inflation standing at 6.9%. On the wage front, the data showed stronger figures
than expected.
However, there are certain indicators pointing to a potential growth slowdown, with the GDP experiencing a dip and both the manufacturing and services PMIs falling in July. As traders await the BoE's decision, they will be closely monitoring any updated economic projects that could provide insight into monetary policy decisions and rate hikes until the end of the year.
The ISM Manufacturing and Services data present a somewhat conflicting picture. The manufacturing data showed a larger-than-expected decline, falling below the 50 level, indicating contraction. On the other hand, the services data exhibited resilience, rising to 53.0, suggesting expansion in that sector.
The
consensus for the upcoming ISM Manufacturing PMI is expected to improve from
46.0 to 46.9, signalling a slight recovery. Meanwhile, for the ISM Services
PMI, the consensus anticipates a minor decline from 53.9 to 53.0, while still
remaining in expansionary territory. The resilience observed in the services
PMI indicates that consumer demand remains robust, which is a positive sign for
the broader economy.
The consensus for the employment change in Canada is to increase by 15.5K jobs,
which is much smaller than the stronger-than-expected 60K rise in June.
Additionally, the unemployment rate is projected to increase slightly from 5.4%
to 5.5%.
The BoC will closely monitor the jobs data as it weighs possible decisions for its September meeting. The GDP showed stronger-than-anticipated performance recently, but the slight rise in the unemployment rate suggests a less tight labour market, which aligns with the BoC's preferences. However, should the labour market continue to outperform expectations, and if inflation data remains elevated, the BoC might opt to continue its interest rate hikes.
The consensus for the NFP data in the U.S. stands at 200K. Although the employment growth rate was slower than previously believed after data from April and May was revised, the job market remains robust. The unemployment rate is expected to remain steady at 3.6%, while the average hourly earnings are forecasted to rise by 0.3%, slightly down from the previous 0.4%.
On Tuesday, the JOLTS report will also be released, and according to Bloomberg, job openings are anticipated to decline to 9,620K as demand for workers diminished. Meanwhile, initial jobless claims have decreased consistently in each of the first three weeks of July, reaching their lowest level since February.
This article was written by Gina Constantin.
