The main event in the European session will be the release of the Eurozone July Flash CPI report. In the American session, we will get the US ADP, the Canadian GDP, the US Q2 Employment Cost Index, the Treasury Refunding Announcement and finally the FOMC Policy Decision.
09:00 GMT - Eurozone July Flash CPI
The Eurozone Flash CPI Y/Y is expected at 2.4% vs. 2.5% prior, while the Core CPI Y/Y is seen at 2.8% vs. 2.9% prior. The ECB members continue to repeat that September is a live meeting for another rate cut and that the markets expectations of two more cuts this year “seem reasonable”.
Having said that, after this report we will get another one at the end of August before the ECB decision on September 12th. The central bank will want to see the disinflationary trend to remain intact to deliver a rate cut in September, if we were to see a reacceleration, they might hold off and skip for another month.
12:30 GMT/08:30 ET - US Q2 Employment Cost Index
The US Q2 Employment Cost Index (ECI) is expected at 1.0% vs. 1.2% prior. This is the most comprehensive measure of labour costs, but unfortunately, it’s not as timely as the Average Hourly Earnings data. The Fed though watches this indicator closely. Although wage growth remains high by historic standards, it’s been easing for the past two years.
18:00 GMT/14:00 ET - FOMC Policy Decision
The Fed is expected to keep rates steady at 5.25-5.50%. The overall decision will likely be dovish given the easing in the labour market and inflation. Lots of people have been calling for the Fed to signal a rate cut in September already at today's decision, so we will see if they will accomodate those expectations.
The market has already fully priced in a rate cut in September and December with some chances of a back-to-back cut in November. I personally think that the next CPI release will be key (barring a quick deterioration in the labour market) as another benign report will likely see Fed Chair Powell pre-committing to a rate cut in September at the Jackson Hole Symposium.
