Main Macro Events This Week
The FOMC tightened policy last week and followed with a more hawkish stance as it suggested two more hikes could be on the way this year. Additionally, the ECB finally announced a phase-out of QE asset purchases. But, a balanced press conference from Fed Chairman Powell and a dovish slant from President Draghi mitigated a bearish response in the markets. But trade tensions resurfaced Friday after President Trump’s announced tariffs on China, which responded in kind. Central banks remain in the spotlight and the BoE headlines, but there are also decisions from Switzerland, Taiwan, Thailand, and the Philippines, along with the ECB’s Sintra conference. OPEC meets while PMI data will provide timely clues global economies.
United States: The U.S. data calendar should support the more upbeat message on the economy delivered by the FOMC last week. Housing reports dominate and should show overall improvement. June PMI reports should also reveal still solid readings, even if they moderate slightly. And the leading economic index should rise for an 8th consecutive month. May housing starts (Tuesday) are estimated rising 0.6% to 1.295 mln following a 3.7% plunge in April to 1.287 mln. The June NAHB housing market index (Monday) is expected unchanged at 70. Also on tap is the FHFA home price index (Thursday) which should rise to 263.1 in April from 261.7. The Philly Fed index (Thursday) should fall 9.4 points to a still-strong 25.0 in June, after jumping 11.2 points to a 1-year high to 34.4 in May, with a concomitant slide in the ISM-adjusted Philly Fed to 59.7 from a 45-year high of 62.5 in May. Markit manufacturing and services PMIs are due Friday. The May leading economic index (Thursday) is expected to rise 0.3%, following gains of 0.4% in April and March. This would be an 8th consecutive increase, and the index hasn’t posted a decline since May 2016. The current account deficit (Wednesday) is expected to widen to -$129.0 bln in Q1, from -$128.2 bln in Q4. Initial jobless claims (Thursday) are seen edging up 1k to 219k in the week ended June 16, which coincides with the BLS employment survey week. Claims are oscillating around tight levels at multi-decade lows.
Canada: The calendar features two top tier data releases and an appearance by a Bank of Canada official. The week beings with Senior Deputy Governor Patterson (Monday), who speaks to the Investment Industry Association of Canada on “Rebooting Reference Rates.” In May, the Bank maintained the 1.25% rate setting and moved closer to hiking rates again, but assured that their approach remains gradual.
CPI (Friday) is expected to climb 0.4% in May (m/m, nsa) after the 0.3% gain in April, as further gains in gasoline prices boost the CPI. The CPI is projected to expand at a 2.5% y/y pace in May from 2.2% in April. A jump in the annual CPI growth rate should not alter the BoC’s gradualism — in the May announcement they noted that inflation will “likely be a bit higher in the near term than forecast in April” due mostly to gasoline prices.Retail sales (Friday) are anticipated to rise only 0.1% (m/m, sa) in April after the 0.6% gain in March, as a decline in vehicle sales weighs. The ex-autos aggregate is expected to improve 0.5% after the 0.2% drop in March. Wholesale shipment (Thursday) are seen rising 0.5% in April after the 1.1% gain in March, which would provide a welcome contrast to the 1.3% plunge in manufacturing shipment volumes revealed for April.
Europe: This week’s round of data releases, which include preliminary PMI readings, are unlikely to offer much comfort as we expect a further decline in confidence levels across both manufacturing and services sectors. With markets still adjusting to the latest policy twists, data releases may have limited impact.
The Eurozone June Manufacturing PMI (Friday) at 55.0, down from 55.5 in the previous month, as trade concerns continue to bite. The services reading is expected to hold up slightly better and fall back to 53.8 from 53.8 in the May. This could leave the overall reading at 53.6, down from 54.1 in the previous month. Again, still a robust number suggesting solid growth, but the ongoing decline in confidence readings in Q2 will likely lead to further downward revisions to growth estimate, as the slowdown in Q1 proved to be not quite as temporary as initially expected. So far labor markets continue to improve and wage growth is picking up, so only a small decline in the Eurozone preliminary consumer confidence number is expected (Thursday) to 0.1 from 0.2, although negative geopolitical headlines could have dented sentiment more than anticipated.
Other data releases include national French confidence numbers, as well as the final reading of French Q1 GDP, the latter too backward looking to have much impact. German PPI inflation is expected to jump to 2.5% from 2.0% thanks to higher oil prices, but at this juncture that won’t matter much as the ECB already lifted its inflation forecasts.
UK: The BoE’s MPC gathers for a policy meeting (announcing Thursday), where a no change in the 0.5% repo rate and QE totals are widely anticipated. The focus will fall on the statement and minutes for guidance, which will be of particular interest following a run of overall disappointing data so far available from April and May. Much will also depend on incoming data and how the worsening trade war evolves, in so far as it starts to have a material impact on global economies, thereby, and policymaker decision making. The UK’s data calendar features the June CBI industrial trends survey (Wednesday), which due to the reports limited breadth and short survey period tends to be overlooked by markets, and May government borrowing figures (Thursday).
Japan: The April all-industry index (Thursday) is estimated rising 0.8% m/m from the prior flat reading. The pace of inflation likely slowed slightly. May national CPI (Friday) should reveal a cooler 0.5% y/y pace overall from the prior 0.6% clip.
Australia: The minutes to the Reserve Bank of Australia’s May meeting (Tuesday) are the highlight of a thin week.
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Andria Pichidi
Market Analyst
HotForex
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