UPCOMING EVENTS:
- Monday: Japan Wage data.
- Tuesday: US NFIB Small Business Optimism Index, Fed Chair Powell Testimony.
- Wednesday: Japan PPI, China CPI, RBNZ Policy Decision, Fed Chair Powell Testimony.
- Thursday: UK GDP, US CPI, US Jobless Claims.
- Friday: New Zealand Manufacturing PMI, US PPI, US University of Michigan Consumer Sentiment.
Tuesday
Fed Chair Powell will testify to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. The market participants will be attentive to any view or hint about the monetary policy trajectory after the recent NFP report.
The text is generally released before the testimony so that will be scanned for clues or “bias”, but the market will also be focused on the Q&A session following the opening remarks. Given the recent data, Powell will likely lean on the dovish side.
Wednesday
The RBNZ is expected to keep interest rates unchanged at 5.5%. As a reminder, the central bank delivered a hawkish hold at the last meeting as they raised the Official Cash Rate forecasts and pushed back the first rate cut to late 2025. The market continues to expect 41 bps of easing by the end of the year.
Thursday
The US CPI Y/Y is expected at 3.1% vs. 3.3% prior, while the M/M measure is seen at 0.1% vs. 0.0% prior. The Core CPI Y/Y is expected at 3.4% vs. 3.4% prior, while the M/M figure is seen at 0.2% vs. 0.2% prior.
This is going to be an important release. I think the Fed will be more dovish at the next meeting if we get a good report. Then, if we get some more benign figures in August, Fed Chair Powell will likely pre-commit to a rate cut in September at the Jackson Hole Symposium.
The US Jobless Claims continue to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market.
Initial Claims remain pretty much stable around cycle lows and inside the 200K-260K range created since 2022. Continuing Claims, on the other hand, have been on a sustained rise recently with the data printing new cycle highs every week.
This shows that layoffs are not accelerating and remain at low levels while hiring is more subdued. This is something to keep an eye on. This week Initial Claims are expected at 240K vs. 238K prior, while Continuing Claims are seen at 1860K vs. 1858K prior.
Friday
The US PPI Y/Y is expected at 2.3% vs. 2.2% prior, while the M/M measure is seen at 0.1% vs. -0.2% prior. The Core PPI Y/Y is expected at 2.5% vs. 2.3% prior, while the M/M figures is seen at 0.2% vs. 0.0% prior. I don’t expect this data to influence the market much given that the sentiment will be set by the CPI report the day before.
