- Monday: NZ Services PMI, US NAHB Housing Market Index.
- Tuesday: RBA Meeting Minutes, Canada CPI, US Building Permits and Housing Starts.
- Wednesday: PBoC LPR, UK CPI, BoC Summary of Deliberations, FOMC Policy Decision.
- Thursday: NZ GDP, SNB Policy Decision, BoE Policy Decision, US Jobless Claims.
- Friday: Japan CPI, BoJ Policy Decision, UK Retail Sales, Canada Retail Sales, Flash PMIs for AU, JP, UK, EZ, US.
The Canadian Headline CPI Y/Y is expected to tick higher to 3.8% vs. 3.3% prior, while the M/M reading is seen at 0.2% vs. 0.6% prior. The BoC continues to complain about the slow disinflation in the underlying measures, which beat expectations in the previous months although they were lower than the prior readings. There’s currently no consensus for the core measures but higher figures would put the central bank in a tough position given the recent rise in wage growth.
The UK Headline CPI Y/Y is expected to increase to 7.1% vs. 6.8% prior, while the M/M reading is seen at 0.7% vs. -0.4% prior. Such a big increase is due to higher energy prices with the central banks more focused on the core measures at the moment. The UK Core CPI Y/Y is expected at 6.8% vs. 6.9% prior, while the M/M figure is seen at an uncomfortable 0.7% vs. 0.3% prior. This report is unlikely to change the market’s pricing for this week’s BoE meeting where the central bank is expected to hike by 25 bps, but it will influence the expectations for the next meetings.
The Fed is expected to hold rates steady at 5.25-5.50% but the market’s focus will be on the Summary of Economic Projections (SEP) and the Dot Plot to see if the central bank still sees the need for another rate hike or it has reached its terminal rate already. As a reminder, in the June Dot Plot the Fed increased its terminal rate projections by 50 bps to 5.6% from the previous 5.1% in March. The market currently sees a 50/50 chance for another rate hike at the November meeting given the strength in the economic data recently with rate cuts being priced for Q3 2024.
The SNB is expected to hold rates steady at 1.75% given the weak economic data and both the headline and core inflation measures being in the SNB’s 0-2% target band.
The BoE is expected to hike by 25 bps bringing the bank rate to 5.50% with Dhingra being the usual dissenter. Recent communication seems to be leaning more towards keeping interest rates high long enough to let the tightening in the pipeline to come through. Nonetheless, the central bank should keep all the options on the table given its inflation and wage growth rates.
The US Jobless Claims beat expectations once again the last week as the labour market continues to soften although it remains fairly tight. This week the consensus sees Initial Claims at 225K vs. 220K prior and Continuing Claims at 1695K vs. 1688K prior.
The BoJ is expected to keep everything unchanged with rates at -0.10% and YCC to target 10yr JGBs at 0% with a soft cap at -/+0.50% and a hard cap at 1.00%. The yield on the 10yr recently spiked to 0.70% following BoJ Governor Ueda comments about a “quiet exit” from NIRP if the data supports such a move. The BoJ, of course, intervened by buying unlimited amount of JGBs last week as they already repeated many times that they will do so if the pace of the moves is too fast. Moreover, the wage growth data continues to point to a slowdown, and this is something that the BoJ watches very carefully.
The Flash PMIs are usually big market movers as they are the most important leading indicators we have. The market should focus on the Eurozone and the US PMIs, with the latter likely to have a bigger impact on global markets depending on the outcome. The US Manufacturing PMI is expected to match the prior reading at 47.9, while the Services PMI is seen lower at 50.3 vs. 50.5 prior.