UPCOMING EVENTS:
- Monday: Canada Holiday, Swiss Unemployment Rate, BoJ’s Summary of Opinions.
- Tuesday: NFIB Small Business Optimism Index.
- Wednesday: China CPI.
- Thursday: US CPI, US Jobless Claims.
- Friday: Japan Holiday, UK GDP, US PPI, University of Michigan Consumer Sentiment.
Monday: The BoJ’s Summary of Opinions will be scrutinised by market participants for details and clues regarding the BoJ’s monetary policy. Last time, there was a little hint that indicated a possible change as Eamonn highlighted correctly here. In fact, the BoJ implicitly widened the YCC band with a soft cap at -/+0.5% and a hard cap at -/+1.0%. As a reminder, the BoJ intervened twice last week as yields on the 10y JGBs breached the 0.60% level. As of now though, it looks like that the only way is up towards the 1.0% hard cap.
Wednesday: The Chinese CPI Y/Y is expected to fall into deflationary territory at -0.5% vs. 0.0% prior, while the M/M reading is seen flat at 0.0% vs. -0.2% prior. The PPI Y/Y is expected to remain in negative territory at -4.0% vs. -5.4% prior. Chinese authorities promised more support for the economy, but we haven’t seen anything of substance yet.
Thursday: The US CPI Y/Y is expected to tick higher to 3.3% vs. 3.0% prior due to unfavourable base effects and higher gas prices, and the M/M figure to match the prior reading at 0.2%. The Core CPI Y/Y is expected to tick lower to 4.7% vs. 4.8% prior and the M/M reading to print at 0.2% vs. 0.2% prior. The Fed is focused on Core inflation; therefore, the Core M/M figure will be at the top of market’s focus.
The US Jobless Claims remains a key market moving report as the labour market data is at the top of the Fed’s and the market’s attention. This week, Initial Claims are expected at 231K vs. 227K prior, while there’s no consensus yet on Continuing Claims although the prior week’s reading saw an increase to 1700K vs. 1679K prior.
Friday: The US PPI Y/Y is expected at 0.7% vs. 0.1% prior, while the M/M reading is seen at 0.2% vs. 0.1% prior. The Core PPI Y/Y is expected at 2.3% vs. 2.4% prior, while the M/M figure is seen at 0.2% vs. 0.1% prior.
The University of Michigan Consumer Sentiment Index is expected at 70.9 vs. 71.6 prior, but the market is likely to focus more on the inflation expectations figures,with the prior readings showing 3.4% and 3.0% for the 1-year and 5-year inflation expectations respectively.
