Economics & Growth | Europe | FX | Monetary Policy & Inflation | Rates | UK | US
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Key Events
G10
In the US, the main data is:
- CPI – Wednesday. Consensus is 0.2% MoM for core. The Fed will look for continued OER disinflation and, based on CPI and Tuesday’s PPI, an estimate of core PCE near 20bp.
- Retail sales – Wednesday. Following June’s 0.4%, consensus expects a slowdown to 0.1% ex auto. This would still be consistent with above-trend real consumption.
In the Eurozone and UK, the main events will be:
- UK labour market data – Tuesday. Markets expect a rise in unemployment and dip in wage growth. The former would be dovish vs MPR forecasts. Private regular pay growth is the most important element of the latter.
- UK July inflation data – Wednesday. Consensus expects headline at +2.3%, core +3.4% and services +5.5% YoY, slightly weaker than BoE expectations. Base effects will drive headline. We are more dovish and see headline at +2.1%, core at +3.3% and services at +5.3%, opening the way for a September rate cut.
- EZ GDP and employment – Wednesday. Preliminary Q2 results could add evidence the EZ is in a different position to the US – with a tight labour market and continued (albeit slow) growth.
Elsewhere in G10:
- Australia Wage Price Index – Tuesday. Absent a shock, this release will matter little to the RBA. If anything, it could support more dovish RBA pricing with Q2 WPI typically the weakest of the four quarters.
- NAB Business Survey – Tuesday. We watch for continued normalisation of prices – retail prices have increased recently – alongside continued demand deterioration.
- Australia Labour Force Survey – Thursday. Unemployment is likely to creep higher, in line with RBA forecasts. We see upside risks to employment.
- Japan GDP growth (prel.) – Thursday. Following a weak Q1, easy comps should allow for a bounce-back. While risks could be to the downside, it is unlikely to impact the BoJ who are focused on the forward-looking picture.
EM
- India CPI to drop sharply – Monday. Base effects in food prices kick in this month with the headline CPI rate likely dropping below the middle of RBI’s 4% +/- 2% band.
- Czechia inflation to remain at target – Monday. Another at-target CPI print is unlikely to shake the CNB’s still-hawkish resolve. What matters more is whether core disinflation continues.
Other:
- IEA Oil Market Report – Tuesday. The IEA updates forecasts, likely to reflect the further slowdown in Chinese oil demand. However, the overall picture may be better than it seems given stock draws at visible hubs.
Central Banks in Action
- Fed St Louis President Musalem speaks – Thursday. Musalem is a leading hawk. His speech should be a good barometer of September cut risk, our base case.
- RBNZ – Wednesday. We expect rates unchanged at 5.5%; the market leans (73%) for a cut. Above-forecast non-tradables inflation and RBNZ forecasts of a first cut in August 2025 should prompt caution. Minutes will show dovish details: a cut was considered; one is possible this year.
- PBOC to hold 1Y MLF rate at 2.3% – Thursday. Expect PBoC to hold the rate this week, given they surprised the market in July with 20bp cut.
- BSP may cut to 6.25% – Friday. Inflation popped above BSP’s target range of 2-4%, but it is not a major concern. PHP has strengthened amid global volatility and the Fed is set to lower rates. We see a 50% chance BSP cuts next week; if they hold, they likely cut at the next meeting.
Markets to Watch
- ECB cut pricing – looks overly dovish following the recent market volatility. We see value fading the move. EZ data this week could add to this move.
- GBP assets – could see volatility if the June tick-up in hotel prices proves to reverse in July (our base case). While we are long 10Y Gilts strategically, we would enter GBP positions in response to the data rather than in advance (given large uncertainty).
- USD/TWD – Lifers appear to have increased their FX hedging. We estimated that the FX Volatility Fund will deplete around 31.80, meaning scope for considerable momentum selling of this pair. We are short, targeting 30.50.
.
(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.)