Emerging Markets | Europe | FX | G10 | Rates | US
Key Events: Inflation Data Deluge Across DM and EM
- By Macro Hive
Key Events
G10
In the US, the main events are:
- Core PCE – Friday. Expect no surprise since PPI and CPI allow for close approximation. The more reliable indicator of trend will be the Cleveland Fed’s median price PCE, published a few hours after the BEA release.
- Personal income and spending – Friday. Consensus estimates at 0.4% and 0.3% seem reasonable. We look for a continued low savings rate.
- Home prices – Tuesday. Consensus seems reasonable but, even with the limited slowdown, it assumes current house price inflation is enough to support a residential investment recovery.
- Trump vs Biden – Thursday. The first of two US presidential debates between Biden and Trump will happen at CNN’s Atlanta Studio at 2100EST (0100 GMT).
In the Eurozone and UK, the main events will be:
- Eurozone inflation expectations – Friday. Expectations remain elevated across the EZ. The ECB will watch for signs of re-anchoring.
- Preliminary June EZ National CPI – Friday. Continued softening in the headline rates is expected in France and Spain, but a slight rise (on base effects) in Italy. While we get no read on the wage-intensive services sectors, we get one on broader services momentum; the ECB will want a slowdown.
- UK survey data – Monday, Wednesday and Friday. This could dominate in a light UK week. We get final Q1 GDP (Friday) but expect no surprises. More telling could be the Lloyds Business Barometer (Friday), which is running hot, and the CBI price and sales surveys (Monday and Wednesday).
Elsewhere in G10:
- Australia CPI – Wednesday. The RBA shifted more hawkish at their last meeting, only considering a hike or a pause – not a cut. Most expect prices flat through May, with the YoY rate up to 3.6%. The details will matter, with this release’s skewed towards services.
- Swiss KOF and UBS Surveys – Wednesday and Friday. Both surveys indicate improvement in the Swiss economy. We look for signs this is continuing.
- New Zealand ANZ Business Survey – Thursday. Despite a high policy rate, the Q1 economy grew faster than expected, coinciding with still-positive economic business expectations. We follow these for signs the RBNZ must loosen policy.
- Canada CPI – Tuesday. BoC minutes hinted a June cut vs July was a close call. Therefore, next week’s outturn must be sufficiently dovish vs expectations of 2.6% and 2.9% for CPI-Median and CPI-Trim respectively to move markets.
EM
- Singapore CPI to moderate – Monday. Disinflation trends should continue as external and domestic demand-pull price pressures ease. If CPI stays on track for MAS forecast, we expect the slope of S$NEER band could be reduced in April.
- Brazil Quarterly Inflation report – Wednesday. At this week’s MPC meeting, BCB raised the 2024 CPI forecast to 4% from 3.8%. The quarterly report will provide more colour on assessment of risks and update the 2026 forecast.
- Polish inflation to climb – Friday. Higher fuel prices, an unhelpful base effect and a weaker currency will see YoY inflation rise further.
Central Banks in Action
- Fed speakers – Four this week. The more influential will be Waller on Monday and the more dovish Cook on Tuesday .
- ECB speakers – Nagel, Villeroy, Schnabel, Panetta, and Lane speak. Recent talking points have been relatively united.
- CBRT on hold – Thursday. With May inflation (75.5% YoY) likely to be the peak, CBRT are set to remain on hold, but with a continued hawkish tone.
- CNB to slow easing – Thursday. Consistently hawkish commentary and headline / core CPI that remain above target point to a smaller 25bp cut.
- BSP on hold – Thursday. At the last MPC meeting, the BSP governor signalled willingness to cut before the Fed. But the risk of a rise in CPI this summer and persistent Peso weakness likely mean this meeting will be a hold.
- BCB minutes – Thursday. This week’s MPC left the impression that BCB will remain on hold until inflation improves. The BCB could use the minutes to adjust the message if it wishes to signal hikes are possible.
- Banxico to hold – Friday. Banxico is very likely to stay on hold at 11%, unanimously with cautious forward guidance on gradual cuts depending on inflation.
Markets to Watch
- EUR/USD: Flirting around 1.07; French election drama has seen market participants pushing for EUR/USD downside.
- USD/JPY: The currency has climbed nearer 160, despite tighter rate differentials. Intervention risks, too. Dips below 154 should be used to turn long.
- AUD/NZD: Up against 1.09, the pair needs a kicker to push it up to the top end of the range. We may get that from Australia CPI. We still believe the pair is only worth playing from range edges.
- Chinese stocks: Chinese A-shares are testing 3000 amid large outflows from Connect channels. Market talk suggests ‘National Team’ has intervened in HK listed stocks. Question is will they intervene in onshore stocks as well next week.
- USD/CNY fixings: Fixings are gradually making new highs for the year, allowing more scope for spot to rise.
- 10Y UST is nearing overbought down around 4.2%. Yield appears to have found a base. While there is little data to suggest a rapid move this week, we watch the level closely.
- EUR 2s10s swap slope remains heavily inverted at -43bp. We see room for steepening out of inversion ahead, led by the 10Y swap, which looks too low given inflation expectations.
(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.)