UPCOMING EVENTS:
- Tuesday: Australia Wage Price Index, UK Labour Market report, Eurozone ZEW, US NFIB Small Business Optimism Index, US PPI.
- Wednesday: RBNZ Policy Decision, UK CPI, US CPI.
- Thursday: Japan Q2 GDP, Australia Labour Market report, China Industrial Production and Retail Sales, UK Q2 GDP, US Retail Sales, US Jobless Claims, US Industrial Production and Capacity Utilisation, NAHB Housing Market Index.
- Friday: New Zealand Manufacturing PMI, UK Retail Sales, US Housing Starts and Building Permits, US University of Michigan Consumer Sentiment.
Tuesday
The Australian Wage Price Index Y/Y is expected at 4.0% vs. 4.1% prior, while the Q/Q measure is seen at 0.9% vs. 0.8% prior. The RBA stated that wage growth appeared to have peaked but it remains above the level consistent with their inflation target.
The UK Unemployment Rate is expected at 4.5% vs. 4.4% prior. The Average Earnings Ex-Bonus is expected at 5.4% vs. 5.7% prior, while the Average Earnings incl. Bonus is seen at 4.6% vs. 5.7% prior.
As a reminder, the BoE cut interest rates by 25 bps at the last meeting bringing the Bank Rate to 5.00%. The market is assigning a 62% probability of no change at the upcoming meeting and a total of 43 bps of easing by year-end.
The US PPI Y/Y is expected at 2.3% vs. 2.6% prior, while the M/M measure is seen at 0.2% vs. 0.2% prior. The Core PPI Y/Y is expected at 2.7% vs. 3.0% prior, while the M/M reading is seen at 0.2% vs. 0.4% prior. The market will focus more on the US CPI release the following day.
Wednesday
The RBNZ is expected to cut the Official Cash Rate by 25 bps to 5.25%. The market started to price in a reduction at the upcoming meeting as the central bank leant to a more dovish stance at its latest policy decision. In fact, the RBNZ stated that “the Committee expected headline inflation to return to within the 1 to 3 percent target range in the second half of this year” which was followed by the line “The Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”.
The UK CPI Y/Y is expected at 2.3% vs. 2.0% prior, while the M/M measure is seen at -0.2% vs. 0.1% prior. The Core CPI Y/Y is expected at 3.5% vs. 3.5% prior. Softer figures will likely increase the market’s expectation for a back-to-back cut in September, but it’s unlikely that they will change that much given that we will get another CPI report before the next BoE decision.
The US CPI Y/Y is expected at 3.0% vs. 3.0% prior, while the M/M measure is seen at 0.2% vs. -0.1% prior. The Core CPI Y/Y is expected at 3.2% vs. 3.3% prior, while the M/M reading is seen at 0.2% vs. 0.1% prior.
This report won’t change the markets expectations for a rate cut in September as that’s a given. What could change is the difference between a 25 bps and a 50 bps cut. In fact, right now the market is basically split equally between a 25 bps and a 50 bps cut in September.
In case the data beats estimates, we should see the market pricing a much higher chance of a 25 bps cut. A miss shouldn’t change much but will keep the chances of a 50 bps cut alive for now.
Thursday
The Australian Labour Market report is expected to show 12.5K jobs added in July vs. 50.2K in June and the Unemployment Rate to remain unchanged at 4.1%. Although the labour market softened, it remains fairly tight.
The RBA delivered a more hawkish than expected decision last week which saw the market repricing rate cuts from 46 bps to 23 bps by year-end. Unless we get big surprises, the data shouldn’t change much.
The US Retail Sales M/M is expected at 0.3% vs. 0.0% prior, while the Ex-Autos M/M measure is seen at 0.1% vs. 0.4% prior. The Control Group M/M is seen at 0.2% vs. 0.9% prior. Although we’ve been seeing some softening, overall consumer spending remains stable.
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 inside the 200K-260K range created since 2022, while Continuing Claims have been on a sustained rise showing that layoffs are not accelerating and remain at low levels while hiring is more subdued.
This week Initial Claims are expected at 235K vs. 233K prior, while Continuing Claims are seen at 1871K vs. 1875K prior.
