Events to Look Out for Next Week

Andria Pichidi

June 9, 2023

Central bank policies are the focus in the week ahead with the FOMC, ECB, and BoJ on tap, as well as the PBoC. The BoE subsequently meets on June 22. They look to be difficult decisions for all, though with the BoJ’s perhaps the least so. The big questions for Western banks include whether rates are sufficiently restrictive and if there is enough evidence of a slowing in inflation to allow for a pause. Thus, the key will be the tone and verbiage in the press conference.

Monday – 12 June 2023

Monthly Budget Statement (USD, GMT 18:00)

Tuesday – 13 June 2023

Employment change & ILO rate (GBP, GMT 06:00) – UK Earnings with the bonus-included and ILO unemployment figures are expected a bit higher at 6.1% (3 Mo/y) and 4.0% respectively.
German ZEW (EUR, GMT 09:00) – The key topic for the Eurozone’s biggest and most important economy. Data is expected to show June’s ZEW economic sentiment contracting at -14 from -10.7.
Consumer Price Index (USD, GMT 12:30) – The CPI is anticipated to show gains of 0.2% for the headline and 0.4% for the core in May, after April gains of 0.4% for both. CPI gasoline prices look poised to plunge -6% in May. We expect dissipating upward pressure on core prices through 2023 as disruptions from global supply chain bottlenecks and the war in Ukraine subside. As-expected May CPI figures would result in a slower y/y headline rise of 4.2% from 4.9% in April, versus a 40-year high of 9.1% in June. We expect the core y/y gain to slow to 5.2% from 5.5% in April, versus a 40-year high of 6.6% in September.

Wednesday – 14 June 2023

Gross Domestic Product, Industrial & Manufacturing Production and Trade balance (GBP, GMT 06:00) – Growth has turned out to be stronger than anticipated this year, but so has inflation. UK GDP growth for April is expected to remain contacted. Industrial and Manufacturing Production for April are both expected at -0.1%.
Producer Price Index and Core (USD, GMT 12:30) – The May PPI is seen swinging at -0.1% for the headline and 0.2% for the core, after April gains of 0.2% for both. As expected readings would result in the y/y headline PPI metric easing to 1.5% from 2.3%, versus an all-time high of 11.7% in March of 2022. We expect the y/y core measure to fall to 2.9% from 3.2%, versus an all-time high 9.7% in March of 2022. The y/y calculation should fall sharply through mid-2023 as comparisons become much easier. Overall, the massive PPI climb since the start of 2021 exceeded the uptrend in headline and core CPI data, and both sets of gains have chased outsized increases in the trade price measures.
Interest Rate Decision, Monetary Policy Statement and Press Conference (USD, GMT 18:00) – The markets are pricing about 70% chance for a pause from the FOMC, but with about a 65% risk for a hike at the July 26 meeting. Much to their chagrin, the markets were also pricing in less than 50-50 bet for action by the BoC and RBA this week, the subsequent rate hikes have imparted some concern that the Fed will also decide rates are still not high enough. Implied Fed funds futures slipped after the claims data eased fears of Fed rate hike next Wednesday. However, it’s only 1 blip on the radar screen amid a very noisy batch of numbers since the May 2-3 FOMC. The question is whether this is a harbinger of the long-awaited weakening in the labor market.
Gross Domestic Product (NZD, GMT 22:45) – GDP for Q1 should contract to -0.1% q/q from -0.6% q/q.

Thursday – 15 June 2023

Employment and Unemployment Rate (AUD, GMT 01:30) – The Australian jobs market is expected to show a negative employment report, with only 2.6k jobs in May while unemployment is anticipated higher at 3.8%.
Interest Rate Decision, Monetary Policy Statement and Press Conference (EUR, GMT 12:15 & 12:45) – The ECB is set to deliver another 25 bp rate hike next week. Central bankers have made it clear that the drop in core inflation last month, isn’t enough to declare victory over inflation. At the same time though, the fact that latest revisions show the Eurozone in recession over the winter and confidence indicators signal renewed weakness in manufacturing means the push back against additional hikes is likely to get stronger. Rates are already in restrictive territory now, and next week’s forecast updates is likely to bring slight downward revisions to both growth and inflation forecasts. Lagarde will likely keep the option of another rate hike in July open, but also stress again the data dependency of additional action. We continue to see a last hike in July, which is in line with consensus. There is an outside chance of a rate hike in September, and once rates have peaked, the ECB is likely to send a very clear message that rates will remain in at that level for a long time.
Retail Sales and Philly Index (USD, GMT 12:30) – May Retail sales are expected at 0.1% for the headline and 0.3% ex-autos, after April gains of 0.4% for both. The Philly Fed index is expected to fall to -14.0 from -10.4 in May. The various producer sentiment measures have fallen substantially into 2023 from remarkably lofty peaks.

Friday – 16 June 2023

Interest Rate Decision, Monetary Policy Statement and Press Conference (JPY, GMT 03:00) – The BoJ is expected to remain sidelined. There has been some speculation of a shift in YCC, but comments from Governor Ueda suggest he wants to maintain the easy stance to allow the economy’s gains to fully take hold. BoJ sees little need to tweak yield curve control, according to a Bloomberg source story. Bloomberg cited people “familiar with the matter” as saying that given the improvement in the functioning of the bond market and the smooth shape of the yield curve, there is little need to adjust the yield curve control program. Officials recognise that inflation is running stronger than they expected, which means the BoJ could upgrade its inflation forecast in the quarterly economic outlook report in July, although the officials aren’t confidence enough yet to say that the 2% price target is assured, indicating the need for continues monetary stimulus. The sources stress through that the final policy decision will be made after assessing economic data and developments in financial markets up until the last moment, according to Bloomberg. The BoJ’s two-day meeting concludes on June 16 and a Bloomberg survey showed that all respondents expect Governor Ueda to keep policy on hold.
Consumer Price Index (EUR, GMT 09:00) – The Eurozone inflation data for May showed the headline rate falling -0.9 percentage points to 6.1% y/y. This was the fifth consecutive decline and the lowest reading since February of 2022. Much of the improvement reflects the correction in energy prices. The ECB’s latest survey showed that expectations for the next 12 months fell to 4.1% from 5.0% in March.
Michigan Sentiment (USD, GMT 14:00) – The preliminary Michigan sentiment report is expected to reveal a headline dip to a 7-month low of 59.0 from 59.2 in May, versus a 13-month high of 67.0 in February.

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Andria Pichidi

Market Analyst

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