Emerging Markets | Europe | US
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Key Events
G10
In the US, the main releases are:
- July durable goods orders – Monday. The market is looking for a rise of 4.2% MoM after June’s dip, but a flat reading ex-transportation.
- The second reading of Q2 GDP – Thursday. Expectations are for the QoQ SAAR to remain at +2.8% from the first read. The detail could be informative, though.
- Personal income & spending for July – Friday. The market is expecting income to remain at +0.2% MoM, while MoM spend accelerates to +0.5%.
- August’s Final UoM Sentiment Survey – Friday. The headline outturn is expected to roughly match the preliminary reading. We will be watching the details
In the Eurozone and UK, the market is currently fully pricing a 25bp cut in September. ECB comments suggest this is their base case, unless there is a big surprise in the data. Given data uncertainty we see good risk reward tactically fading this pricing. We could get more information on this from:
- Preliminary Eurozone August CPI – Friday. The market is expecting headline CPI to drop to +2.2% YoY, core to drop to +2.8%. In our view, +2.2% headline is reasonable, but we have pencilled in a beat (+2.9%) for core and for services to remain stable elevated at around +3.9%
- Eurozone unemployment – Friday. The market is expecting unemployment to remain stable at 6.5% after last month’s rise. We will be watching the employment number closer than the unemployment one. A strong outturn there would add further to the idea of continued labour hoarding.
Elsewhere in G10:
- Australia CPI – Wednesday. As the first release of the quarter, goods prices will dominate the print. It will pressure a resistantly hawkish RBA into a twist of dovishness.
- Swiss UBS Survey & KOF Indicator – Wednesday and Friday. Export expectations likely prove more important than the headline number.
- New Zealand ANZ Business Survey – Thursday. The RBNZ cut rates following an onslaught of dovish survey data. The ANZ Survey failed to register as poorly. We are watching to see if this continues.
EM
- Polish inflation acceleration to continue – Friday. Unhelpful base effects and continued passthrough from earlier energy price hikes mean further increase in YoY CPI.
Central Banks in Action
- NBH to pause its easing cycle – Tuesday. Inflation now above the tolerance band and earlier FX weakness point to rates on hold this month.
Markets to Watch
- USD/CHF is at range lows on extended positioning. We think a rebound to 0.87 is likely.
- FX carry has remained on a rocky path. However, we expect the strategy to perform ahead.
- ECB pricing closely – given uncertainty in data, our lean is more hawkish than the current 70bp of ECB cuts the market is pricing. This week’s inflation and labour market data could have a strong impact.
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(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)