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Key Events
G10
In the US, there is only one key data event:
- NFP – Friday. The consensus is for 175k, which would add to Fed confidence that the economy is doing well and remove concern about the employment mandate.
In the Eurozone and UK, the main events will be:
- UK Chancellor’s statement – Monday. She will announce the budget date and probably gear up for tax rises. This should be positive for our Gilts trade.
Elsewhere in G10:
- Swiss KOF Indicator – Tuesday. The widely watched indicator should continue to point to upside in the economy.
- ANZ Business Survey – Wednesday. Markets will be watching for continued disinflation trends within the survey. We will focus on service price details.
- Australia CPI – Wednesday. A trimmed mean reading above 1.1% QoQ will amp RBA pricing to at least a 50-50.
- Swiss CPI – Friday. We will watch for further disinflation in core inflation excluding housing. That will keep pressure on the SNB for another cut in December.
EM
- China July Politburo Meeting – Wednesday. The end-July meeting could hit market sentiment. With growth undershooting target, markets want more stimulus for consumption and the property market, monetary easing, and fiscal support for H2.
- China PMIs – Wednesday. Domestic demand growth is stalling on our high-frequency indicators. Caixin PMI is biased higher due to exports, but the broader composite PMI could drop to close to 50.0.
- Korea Exports – Thursday. Market expectations of a solid +18% YoY growth seem reasonable. The partial 20-day data was +18% YoY for July, and Taiwan printed +24% YoY for June. The question is whether the recovery remains primarily a semi-conductor story.
- Mexico Remittances – Thursday. YoY growth in remittances has been falling; the latest 3mma is at 1% growth compared to 10% growth this time last year.
Central Banks in Action
- Fed on hold – Wednesday. With the charged political climate around monetary policy, Powell will probably avoid guidance on the timing of the first cut.
- BoE (probably) on hold – We expect no cut, but it is a close call. On hawkish side: lack of BoE comments to telegraph a cut and volatile data. But the medium-term outlook is dovish.
- BoJ to stay on hold – Wednesday. Markets price almost a 70% chance of a 15bps hike, so the meeting is live. Also watch for how quickly JGB purchases slow; consensus expects slowing to 5tn JPY, and 3tn JPY in two years.
- BCB to hold Selic rate at 10.5% – Thursday. We expect little change in the statement. Inflation expectations have been stable since June meeting, but with BRL under pressure the BCB will maintain a cautious / hawkish tone.
Markets to Watch
- Chinese stocks at key support. The CSI 300 is hovering around 3400, while the broader SCHOMP Index slipped below 2900. PBoC rate cuts failed to lift sentiment, perhaps due to the global equity sell-off. If the July Politburo signals increased fiscal spending, we think the market can rally.
- USD/JPY – JPY shorts were squeezed last week as USD/JPY fell back to 152.0, which again held as support. A dovish BoJ could give carry traders the green light to re-enter shorts.
- AUD/NZD will be highly reactive to Q2 Aussie CPI. A beat in CPI will set up an RBA hike and for AUD/NZD to trade higher. We believe this will set up an attractive opportunity to be short the pair.
- EUR/NOK is at Covid-era highs having broken away from US yields. A return to 11.50 or lower could be in store.
- NOK/SEK is likely to remain rangebound. In the near term, it is likely grinds towards 0.99 before turning lower again.
- 10Y Gilt yields could break down further. A BoE cut would help that near term, but we think if they do not ease soon, medium-term inflation will undershoot (Gilt positive).