UPCOMING EVENTS:
- Tuesday: UK Labour Market report, German ZEW, US NFIB Small Business Optimism Index.
- Wednesday: Japan PPI, UK GDP, EZ Industrial Production, US CPI.
- Thursday: Australia Labour Market report, Japan Industrial Production, Switzerland PPI, ECB Policy Decision, US Jobless Claims, US PPI, US Retail Sales.
- Friday: NZ Manufacturing PMI, China Industrial Production and Retail Sales, Eurozone Wages data, US University of Michigan Consumer Sentiment.
Tuesday
The UK Unemployment Rate is expected to
rise to 4.3% vs. 4.2% prior, but the market will likely focus more on the wages
data which is seen matching the prior readings with the Average Earnings
ex-Bonus at 7.8% and Average Earnings incl. Bonus at 8.2%. The September rate
hike is basically a done deal at this point, so this report should influence
the market pricing beyond September.
UK Average Earnings ex-Bonus
Wednesday
The US Headline CPI Y/Y is expected to rise
to 3.6% vs. 3.2% prior, while the M/M reading is seen at 0.6% vs. 0.2% prior.
The jump in Headline CPI is due to higher energy prices, which should be
temporary, in fact the Fed is focused on the Core measures. The Core CPI Y/Y,
which excludes the volatile food and energy prices, is expected to fall to 4.3%
vs. 4.7% prior, while the M/M figure is seen again at 0.2% vs. 0.2% prior.
Unless this report is uncomfortably hot all around, it’s unlikely to change the
market’s pricing for the September meeting, which sees the Fed to hold rates
steady. In fact, the debate now is more about the November decision, and most
importantly when the Fed will start to cut rates.
US Core CPI MoM
Thursday
The ECB is expected to keep the deposit
rate steady at 3.75%, but in reality, it’s more of a coin toss with the rate
hike probability standing around 60%. The data has been surprising to the
downside lately and the deterioration has been fast. Inflation and labour
market indicators though are still strong, and the central bank may fear that
it might take too much time to get back to the 2% target. In fact, the longer
high inflation stays in the system, the higher the chances that inflation
expectations de-anchor and the harder it will be to bring it down later.
ECB
The US Jobless Claims remains a key weekly
labour market indicator and it’s been showing continued strength with the data last
week beating expectations by a big margin.
This week the consensus sees Initial Claims at 226K vs. 216K prior, while
Continuing Claims are seen at 1693K vs. 1679K prior.
US Initial Claims
Friday
Chinese Industrial Production Y/Y is
expected at 4.0% vs. 3.7% prior, while Retail Sales Y/Y are seen at 2.8% vs.
2.5% prior. The data will show how the activity in the second largest economy
in the world is faring after many big misses the last month.
China Retail Sales
The University of Michigan Consumer
Sentiment is expected to fall to 69.2 vs. 69.5 prior. The prior
final report was revised downwards from the preliminary readings, in line with
the big
miss in the Conference Board Consumer
Confidence report. The UMich survey is more weighted towards consumers
finances, while the Conference Board towards the labour market sentiment.
Therefore, given the higher energy prices, we can expect a lacklustre report
and probably higher inflation expectations.
University of Michigan Consumer Sentiment