Events to Look Out for Next Week

Andria Pichidi

July 29, 2022

The economic agenda ahead is expected to be a massive one, as US NonFarm Payrolls are on tap, along with the BoE and RBA officials, who are heading for their monetary policy meetings. The underperformance of Gilts is already reflecting positioning for a 50 bp hike from the BoE next week, but like the ECB and Fed’s move it could have a dovish twist and markets continue to adjust overall tightening expectations dramatically. In the meantime Labour data from the US, Canada and New Zealand are also in the spotlight along with US ISM PMIs.

Have a look at the most important events of the coming days in our usual weekly publication.

Monday – 01 August 2022

ISM Manufacturing PMI (USD, GMT 14:00) – The ISM index is expected to fall to 52.5 after a drop to 53.0 in June from 56.1 in May, versus an 18-year high of 63.7 in March ’21, an 11-year low of 41.6 in April of 2020, and an all-time low of 30.3 in June 1980.

Tuesday – 02 August 2022

Interest Rate Decision & Statement (AUD, GMT 04:30) – This week’s Australia CPI hit a new 21 year high. Inflation jumped to 6.1% y/y in Q2 of the year from 5.1% y/y in Q1, the highest reading since Q2 2001, but still a tad lower than anticipated, which left markets pricing out supersized RBA hikes. Transport cost inflation remained in double digits, but was still lower than at the start of the year, although the numbers showed a broadening of above target price increases that will continue to worry the central bank, as they clearly exceed the RBA’s 2-3% target. Hence expectations are that the RBA will continue its uber aggressive stance and 50 bp rate hikes, next week.
Jolts (USD, GMT 14:00) – The Job Openings changed little on the last business day of June, at 11.0 million from 11.25 million last month.
Labour Market Data (NZD, GMT 22:45) – Employment change for Q2 is expected to grow by 0.4%, while the unemployment rate is at 3.1%.
FOMC Member Bullard Speech (USD, GMT 22:54)

Wednesday – 03 August 2022

ISM Services PMI (USD, GMT 14:00) – The ISM Services index is expected to hold steady from 55.3 in June, versus an all-time high of 68.4 last November, an 11-year low of 41.8 in April 2020, and an all-time low of 37.8 in November 2008. We’ve seen a broad 7-month pull-back in the producer sentiment measures from remarkably firm November levels. We saw a modest March-April updraft in sentiment from a recent February trough, but worsening financial conditions have further depressed sentiment since April. Producers have benefited from the need to rebuild inventories in 2022 after the stimulus-induced 2021 sales surge, but sentiment is being adversely impacted by rising mortgage rates and mounting recession fears.

Thursday – 04 August 2022

Interest Rate Decision, Statement and MPC Voting (GBP, GMT 11:00) – Recession risks are mounting, and front-loaded rate hikes makes sense as long as policy settings remain accommodative. This holds for the BoE, which is keeping the option of a half point move on the table, as the candidates for Johnson’s succession flaunt tax cuts that would likely fuel inflation further. For the BoE the economic data will add to the arguments in favor of a half point move at the MPC meeting next week. Like the ECB, the Bank of England could want to front-load the cycle and deliver a larger hike this time. The growth outlook may be deteriorating, but the inflation outlook seems even worse than at the time of the last meeting. At the same time, the remaining two candidates for Johnson’s succession have been promising tax cuts to revive the economy. Grass root favorite Liz Truss in particular is banking on immediate tax cuts, which in the current situation would risk adding fuel to the fire. Against that background we suspect that the majority will want the BoE to move sooner rather than later, maybe also to assert its independence, after Liz Truss promised to set a “clear direction of travel” for the BoE. It is not unlikely that future rate hikes will face more resistance from the new government, as debt financing costs are already rising fast and the BoE is mulling a reduction of its GBP 847 bln pounds of Gilt holdings by GBP 100 bln over the space of a year.
BOE Governor Bailey Speech (GBP, GMT 11:30)
FOMC Member Mester Speech (USD, GMT 16:00)

FOMC Member Pill Speech (USD, GMT 11:15)
Event of the Week – Non-Farm Payrolls (USD, GMT 12:30) – A 260k July nonfarm payroll increase is expected, after gains of 372k in June, 384k in May, and 368k in April. Payroll growth should slow through 2022 alongside reduced GDP growth, and the climb in the initial and continuing claims in July suggests downside payroll risk for the month. We assume a 25k factory jobs rise in July, after a 29k June increase. The jobless rate is anticipated to hold steady for a fifth consecutive month at 3.6%. Hours-worked are assumed to rise 0.2% after the 0.3% gain in June, while the workweek holds steady from 34.5 in April. Average hourly earnings are assumed to rise 0.3%, after a 0.3% June gain, while the y/y wage gain should dip to 4.9% from 5.1%.
Labour Market Data (CAD, GMT 12:30) – Canada’s unemployment is anticipated higher in June to 5.2% from 5.1%.

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Andria Pichidi

Market Analyst

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