Emerging Markets | Europe | UK | US
Key Events: More Fed Cuts to Be Priced?
- By Macro Hive
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Key Events
G10
In the US, there is only one key event:
- ISM Services PMI – Monday. Following the NFP miss, any miss relative to consensus of 51.3 could see further rate cuts priced in.
In the Eurozone and UK, it is a quiet week:
- German Final July CPI – Friday. Preliminary EZ July inflation showed slowing services inflation. However, the core and headline re-accelerated. Watch for signs of normalising (stickier) services inflation. We expect this over summer.
- Final July PMIs – Monday. Expect little change of tone from the preliminary readings, but they could add colour on the France-Germany divergence.
Elsewhere in G10:
- Japan Wage Growth – Tuesday. Consensus expects same-sample cash earnings to rise by 3.2% YoY from 2.3% last month as the spring wage negotiations continue to be reflected in the broader data.
- Japan Household Consumption – Tuesday. Following a string of weak consumption outturns, the BoJ will want to concrete evidence of a rebound in the months ahead. The market currently expects a small 0.2% MoM gain.
- Canada Employment – Friday. No doubt, the labour market is loosening. Given the BoC’s increased focus on growth data, a weak outturn will increase the odds of a September rate cut.
EM
- Philippines CPI – Monday. Power tariff hike could push headline above 4% YoY. But core is trending down, and we expect BSP will look through this MoM spike.
- Turkey CPI – Monday. Base effects now turn favourable and should lead to YoY CPI slowing to circa 60% from 71.6%. Upside risks remain, but CBRT is likely to use alternative tools and keep policy rate on hold.
- Thailand CPI – Tuesday. Headline should print around 0.7% YoY, staying below BoT’s target range (1-3%). We expect core to improve thanks to gov. support.
- China Aggregate Financing – 9-15 Aug. July has a negative seasonality, so aggregate number may be lower than 18tn. We watch lending to households and medium-term loans to enterprise to see if rate cuts improved credit demand.
- China Trade Data – Wednesday. High-frequency data like container throughput and freight rates show export growth remained strong. Record trade surplus to support RMB for now.
- Mexico CPI – Thursday. Risks are skewed towards a high print (circa 5.5% YoY) due to non-core components and base effects. As usual, the focus will be core services.
- China CPI/PPI – Friday. PPI deflation likely worsened due to lower commodity prices and base effects. CPI may pick up a little on food prices.
Central Banks in Action
- Fed doves speaking. Goolsbee and Daly, two prominent doves, are speaking. I will be looking for their read of the NFP miss.
- BCB minutes – Tuesday. BCB held rates at 10.5% on 31 July but did not signal a rate hike ahead. The minutes are often used to message balance of risks, but if the guidance is balanced, we would expect a strong steepening of DI curve.
- RBI to hold at 6.5%, shift to neutral bias – Thursday. We expect RBI to drop its hawkish bias and confirm a neutral stance. We do not rule out a rate cut in Q4, as core inflation hovers near record low and food inflation is set to fade.
Markets to Watch
- USD/JPY – USD/JPY has broken through several key support levels at 152 and 150. Further downside may be ahead on strong Japanese data or dovish US.
- S&P 500 – The drawdown in US stocks is still shallow, but as recession fears rise, could we start to see a more pronounced risk-off event?
- WTI Crude – WTI held support at $75/ bbl, while solid inventory draws and rising tensions between Iran and Israel have pushed it higher. We think geopolitical risks should be faded.
- Rates – We will be watching the post-labour market rally closely. We remain bullish UK rates and would not try and fade the US rates bid right now. However, we are conscious that the market is now pricing 100bp of Fed cuts over the three remaining meetings of 2024; this is a sharp change from just a week ago and could be vulnerable to sudden reversal.
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