UPCOMING EVENTS:
Tuesday: UK Jobs Report.
Wednesday: RBNZ Rate Decision, US CPI, BoC Rate Decision.
Thursday: UK GDP, US PPI, US Jobless Claims.
Friday: University of Michigan Consumer Sentiment.
Tuesday: The UK unemployment rate is expected to remain unchanged at 3.8%, but unless we see a big beat/miss, the market will be more focused on the wages data. The Average Earnings ex Bonus is expected to tick lower to 7.1% vs. 7.2% prior, while the Average Earnings Index + Bonus is seen higher at 6.8% vs. 6.5% prior. This report will shape markets’ expectations around the next BoE rate decision and whether the central bank is likely to go with another 50 bps hike or step down to 25 bps. The ultimate decision maker will be the CPI report due on July 19th.
Wednesday: The RBNZ is expected to keep the official cash rate unchanged at 5.50%. This decision is expected due to the New Zealand slipping into a technical recession recently and the RBNZ maintaining its terminal rate forecast unchanged at 5.50% at the last meeting, while also removing the language of further rate increases from the statement.
The US CPI Y/Y is expected to fall to 3.1% vs. 4.0% prior, while the M/M reading is seen at 0.3% vs. 0.1% prior. The Fed is more focused on the Core figures though, and those are still pretty high. The Core CPI Y/Y is seen at 5.0% vs. 5.3% prior, while the M/M reading is expected at 0.3% vs. 0.4% prior. It’s unlikely that the Fed will skip the July hike unless we see some good misses on the Core Inflation side. A higher-than-expected core print is likely to send the markets into risk off across the board and it’s going to be hard to envision a weak US Dollar at that point.
The BoC is expected to hike by 25 bps again after the surprising hike at the last meeting and take the rate to 5.00%. I’d say there’s some chance that the BoC decides to skip at this meeting given the miss in the recent inflation data and the decline in average hourly earnings to 4.2% vs. 5.1% prior.
Thursday: The US Jobless Claims have been moving the markets quite notably lately as the market is particularly focused on the labour market. Initial Claims are expected at 249K vs. 248K prior, while Continuing Claims are seen at 1731K vs. 1720K prior. Despite some upward spike in the Initial Claims, the Continuing Claims keep on trending downwards showing that people are able to secure jobs pretty fast after getting unemployed.
Friday: The University of Michigan Consumer Sentiment is expected at 64.8 vs. 64.4 prior. The market is more focused on the inflation expectations readings and especially the long-term ones. There are no forecasts at the moment, but the prior readings showed 3.3% for the 1-year inflation expectations and 3.0% for the 5-year expectations.
