Key Events: Is the Fed Worried About Housing?

Key Events

G10

In the US, the headline events are:

1. S&P PMIs – Thursday. Consensus sees sideways movement. This is possible but matters little for the big economic picture as PMIS have decoupled from GDP. Our event monitor reveals how to trade a surprise.
2. Durable goods orders – Friday. Consensus on capital goods orders is 0.1%, following a revised -0.2%, which makes sense. This series correlates well with the GDP equipment capex, which has been flat since 2022 despite surging manufacturing construction.
3. Homes sales – existing Wednesday, new Thursday. Expect sales moving sideways to slightly lower. A negative surprise on existing home sales would signal no improvement in inventories and continued housing market tightness, while a negative surprise on new home sales would be marginally negative for residential investment.

In the Eurozone and UK, the main events will be:

1. UK inflation – Tuesday. The market is looking for sharp drop to +2.1% YoY in headline and +3.6% in core. I see downside risk across both, but the most important element will be the detail – particularly whether accommodation inflation has returned towards normal after two strong months.
2. Eurozone Q1 negotiated wage growth – Thursday. ECB policymakers have tied their June decision to the negotiated wage number for some time. The current expectation is for the number not to prevent a cut in June – I agree. Timely wage data has been relatively sanguine. A beat may have to be significant to cause a real change of view from the policymakers.

EM

1. Korea advanced exports – Monday. 20-day exports advanced read on global trade. Negative work-day effects (-2 days from last year) should be factored in to discount the headline number.
2. Singapore CPI – Wednesday. After a large miss last month, the next two prints will be crucial for any shift in the MAS CPI forecast.
3. South Africa CPI stable – Wednesday. Rand strength and lower oil prices should mean monthly inflation momentum drops from the recent highs. YoY inflation should remain broadly unchanged.
4. Banxico minutes – Thursday. Despite the unanimous hold on May 9 meeting, we expect divergent views in minutes. We expect Banxico will resume 25bp cuts from June 27 meeting.

Central Banks in Action

1. Fed – Monday, Tuesday, Wednesday. The minutes (Wednesday) will remind us of the conditions needed for rate cuts, i.e., the Fed needs more confidence in disinflation. Governor Waller will be speaking on the economy (Tuesday) and R* (Friday) and Vice Chair Jefferson on the economic outlook and housing (Monday).
2. ECB & BoE speakers. Several speakers are the wires next week. Watch the ECB’s Lagarde on Wednesday and BoE’s Bailey on Monday. ECB speakers in the back end of the week will be important for their take of the Q1 negotiated wage number. I expect they will continue to strongly favour a June cut.
3. Bank Indonesia – Wednesday. BI very likely to stay unchanged at 6.25%. Pressure on IDR has lessened after the last hike and dovish Fed, so BI will be relaxed.
4. Bank of Korea – Thursday. BoK is expected to be on hold at 3.5%. Inflation is trending down but still above the 2% target. Two new MPC members join (both doves). We expect one cut each in Q3 and Q4.
5. Hungary easing to continue – Tuesday. Virag’s narrowing of the projected end-June policy rate to 6.75-7.00% highlights the NBH’s increased caution as inflation starts to rise. But it still leaves room for another 50bp cut to 7.25% this week.
6. CBRT on hold again – Thursday. CBRT’s 50% policy rate is likely to be the peak. But with inflation still rising, further tightening is likely to come via macroprudential measures and liquidity management.

Markets to Watch

1. Copper and Chinese stocks. Both indicators of market sentiment towards Chinese economy have surged recently. Hang Seng has outperformed SPX by 15% in the last six weeks. Copper is starting to look a little unhinged, especially as the spread between COMEX and Shanghai has widened sharply.

(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.)