Or further to go?
The focus has shifted in recent weeks from how far central banks are going to go in their tightening cycles to how much of an economic slowdown we are facing and if a recession is still avoidable.
There’s no easy answer to that question and while there are signs that markets are starting to price in a recession, there is no consensus. Of course, the fate of some countries looks more certain than others but in most cases, it’s far from a foregone conclusion. For this reason, the economic data over the next week, as well as the views of policymakers, could be huge in determining how markets will behave.
The bank holiday on Monday means it’s a late start for the US but the rest of the week is anything but quiet. The US jobs report and Fed minutes are the obvious standouts but there’s plenty more on top that will ensure it’s another fascinating week.
Can the Fed become more hawkish?
Another super-sized rate hike expected from the RBA
US
A shortened trading week on Wall Street will have traders focusing on the FOMC minutes, a few Fed speakers, and the June nonfarm payroll report. The Fed’s minutes to the last meeting will likely bolster the case for another massive rate hike as inflation remains stubbornly high. The June nonfarm payroll report is expected to show the economy added 250,000 jobs in June, a deceleration from the 390,000 jobs added in the prior month. The unemployment rate is expected to remain steady at 3.6% and average hourly wages might maintain the same 0.3% pace from a month ago.
A couple of Fed hawks, Bullard and Waller will likely make the case for the Fed to be aggressive with the tightening of monetary policy. Fed’s Williams will also speak and has recently noted that 50 or 75 bps will be the debate at the July FOMC meeting.
EU
I don’t think there’s any such thing as a quiet week for Europe at the moment but next week is probably as close as it gets. The bulk of the week is made up of tier two and three data like final services PMIs which are typically not subject to large revisions.
The ECB meeting accounts will naturally be of interest although I’m not sure what we’ll get from them considering how explicit the central bank has been in its intentions. What’s happened since has probably been more significant as it could influence how aggressive they’ll be with the lift-off in a few weeks. For this reason, comments from President Lagarde and her colleagues will be more significant.
UK
A light week on the data front, with the highlight being the final services PMI on Tuesday. But there are a number of BoE policymakers appearing next week including Governor Bailey on Tuesday, with traders keen to know if the MPC will finally join the super-sized club or continue with the slow and steady approach.
Russia
Inflation and PMI data next week, with the former of particular note. That said, the central bank has made clear its intention to continue cutting rates as inflation falls. The Key Rate has already fallen back to 9.5% from 20% where it was hiked to after the invasion. But further cuts could follow in an attempt to support the economy and offset the strength of the rouble.
South Africa
The whole economy PMI on Tuesday is the only notable release next week.
Turkey
Restrictions on lira lending last week had the desired effect on the currency, seeing the USDTRY fall more than 8% over the next couple of days before pulling back. It’s now only 3.5% from the highs, suggesting the government has more to do. A 25% increase in the minimum wage announced on Friday will neither tame inflation nor make people’s lives dramatically easier. Further pain ahead. CPI data on Monday is expected to show annual inflation jumped to 78.35% in June from 73.5% in May.
Switzerland
Inflation data on Monday could support the argument for further rate hikes from the SNB. They do love to spring a surprise on the markets, in contrast to every other central bank, so we can’t ignore the possibility of an inter-meeting decision, even if it appears unlikely at the moment.
China
China continues to have relatively low inflation, in sharp contrast to skyrocketing inflation in most major economies. The June inflation report will be released on Friday. The estimate stands at 2.2% YoY, a notch higher than the 2.1% gain in May. The modest inflationary pressures have allowed the PBOC to continue to inject more stimulus into the economy in order to boost growth.
India
Services PMI is the only release of note next week.
Australia
The RBA holds its policy meeting on Tuesday. In June, the RBA raised rates by 0.50%, surprising the markets which had expected a much smaller increase. Still, with the cash rate currently below 1%, the central bank will have to press the rate pedal to the floor in order to curb soaring inflation. Another 0.50% increase is widely expected at the upcoming meeting, which would bring the cash rate to 1.35%.
New Zealand
It’s a quiet week out of New Zealand, with Wednesday’s Reserve Bank of New Zealand Statement of Intent the only tier-1 event. The RBNZ will present its objectives for the next three years and the markets will be looking for insights into the Bank’s future rate policy. The cash rate is currently at 2.0% and the Bank is expected to raise rates when it meets on July 13th.
Japan
Japan releases household spending on Friday. Japan’s inflation of 2.1% has been much more moderate than in the UK or the US, where inflation is close to double digits. Still, consumers are not used to prices rising, after 15 years of very low inflation. A weaker yen has made imports more expensive, and the Japanese consumer is holding tighter to their purse strings. Household spending is expected to fall by 0.9% in May, after a decline of 1.7% in April.
Singapore
Singapore releases retail sales on Tuesday. The May release came in at 12.1% YoY, pointing to a sharp gain in consumer spending.
Economic Calendar
Saturday, July 2
Economic Events
ECB’s Schnabel speaks on the world economy, monetary policy and the Russia-Ukraine war
Sunday, July 3
Economic Events
German Chancellor Scholz gives a traditional “summer interview” on ARD TV
Monday, July 4
Economic Data/Events
US markets closed for Independence Day
Turkey CPI
Switzerland CPI
Australia building approvals, inflation gauge, home loans value
Canada Manufacturing PMI
Euro area PPI
Germany trade
Japan monetary base
Singapore electronics sector index, PMI
Spain unemployment
The Ukraine Recovery Conference occurs in Switzerland
Tuesday, July 5
Economic Data/Events
US factory orders, durable goods
Thailand CPI
European PMIs: Eurozone, France, Russia
Australia PMI
RBA rate decision: Expected to raise rates by 50bps to 1.35%
India PMI
Singapore PMI
South Africa PMI
China Caixin PMIs
France industrial production
Japan labor cash earnings, PMI
Mexico international reserves
New Zealand commodity prices, house prices
Singapore retail sales
BOE releases financial stability report
Wednesday, July 6
Economic Data/Events
US PMIs, ISM services index, JOLTS job openings, FOMC minutes
Euro area retail sales
Germany factory orders
Spain industrial production
UK PM Johnson appears before Parliament’s Liaison Committee
UN posts annual “The State of Food Security and Nutrition in the World” report.
ECB’s Rehn speaks on a panel on Finnish foreign policy and security
BOE Chief Economist Pill delivers the keynote speech on the second day of the Qatar Centre for Global Banking & Finance’s annual conference in London
BOE Deputy Governor Cunliffe speaks on a panel about central bank digital currency
Thursday, July 7
Economic Data/Events
US ADP employment change, initial jobless claims, trade
G20 foreign ministers meet in Bali
Fed’s Waller speaks at National Association for Business Economics event
Fed’s Bullard speaks at an event hosted by Little Rock Regional Chamber
BOE releases its decision maker survey.
ECB publishes accounts of its June policy meeting.
ECB’s Stournaras, Centeno and Herodotou speak at the Annual Economist Government Roundtable in Athens
BOE’s Mann speaks at the LC-MA Forum on current monetary-policy issues
Mexico CPI
China foreign reserves
Australia Foreign reserves, trade
Singapore foreign reserves
Germany industrial production
Poland rate decision: Expected to raise rates by 75bps to 6.75%
Canada trade
Switzerland unemployment rate
Chile copper exports
Hungary one-week deposit rate
Japan leading index
Mexico releases monetary policy minutes
Russia foreign exchange, gold reserves
Thailand consumer confidence
EIA crude oil inventory report
Friday, July 8
Economic Data/Events
US nonfarm payrolls, unemployment, wholesale inventories, consumer credit
Fed’s Williams speaks at an event hosted by the University of Puerto Rico
ECB’s Lagarde, Schnabel, Villeroy and Stournaras speak at The French Davos, Recontres Econmiques forum
ECB posts climate-risk stress test results for European banks
Russia CPI
Italy industrial production
France trade
Canada unemployment
Japan household spending, BoP, trade balance, bank lending, bankruptcies
New Zealand heavy traffic index
Thailand forward contracts, foreign reserves
Turkey current account
Sovereign Rating Updates
Greece (Fitch)
Turkey (Fitch)
EFSF (Fitch)
ESM (Fitch)
Netherlands (DBRS)
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.
Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
