Fears that aggressive central bank action will hurt the global recovery continue to weigh on risk appetite as yields continue to rise. This week’s data will be key and could provide sufficient information for upcoming decisions. Inflation for China, Germany and the US along with the Fed’s favourite indicator (PPI) and the RBNZ and BOC policy decisions will be the highlights of the week.
Monday – 10 July 2023
Consumer Price Index (CNY, GMT 01:30) – While Western economies have surprised on the more resilient side, China’s recovery has disappointed on the weak side. Indeed, last week’s official PMIs revealed erosion in activity. The Chinese consumer price inflation remains at 0.2% y/y while PPI contracted last month at -4.6% y/y.FOMC Members Daly, Mester and Bostic Speeches (USD, GMT 14:30-16:00) BOE Governor Bailey speech (GBP, GMT 19:00)
Tuesday – 11 July 2023
Average Earnings & ILO (GBP, GMT 06:00) – Last month, UK ILO unemployment unexpectedly declined. The ILO rate dropped to 3.8% in the three months to April from 3.9% in the previous period. Employment growth also came in stronger than anticipated, with 250K more jobs over the three months to April. Average weekly earnings growth meanwhile rose to 6.5% from 6.1% (was 5.8%) and the ex-bonus figure jumped to 7.2% from 6.8% (was 6.7%). A much stronger than expected labour market report that will only harden market expectations for a series of rate hikes from the BOE this year.German CPI & ZEW (EUR, GMT 10:00) – The key topic for the Eurozone’s biggest and most important economy. Data is expected to show negative responses regarding inflation and the expectations for economic growth in Germany, as the ZEW economic sentiment in July is seen contracting at -10.0 from -8.5 and June’s inflation rising to 0.3% m/m from -0.1% m/m.
Wednesday – 12 July 2 023
Rate Statement & Interest Rate Decision (NZD, GMT 02:00) RBNZ delivered the as-expected rate hike of 25 bps in June but also signalled that rates have peaked now. RBA Governor Lowe Speech (AUD, GMT 03:10) BOE Governor Bailey speech (GBP, GMT 08:00) Consumer Price Index and Core (USD, GMT 12:30) – The US inflation is expected grow by 0.3% for the headline and 0.4% for the core in June, after May gains of 0.1% for the headline and 0.4% for the core. CPI gasoline prices look poised to rise 0.4% in June. 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 3.2% from 4.0% in May, versus a 40-year high of 9.1% in June.BOC Rate Statement & Interest Rate (CAD, GMT 14:00) – Canada CPI rose at a 3.4% y/y pace in May, slowing from the 4.4% y/y clip in April. This was the weakest since June 2021. Much of the overall slowing was a function of an -18.3% y/y slump in gasoline and a -12.4% y/y drop in energy prices.
Thursday – 13 July 2023
Gross Domestic Product, Industrial & Manufacturing Production and Trade Balance (GBP, GMT 06:00) – UK Q1 GDP was confirmed at 0.1% q/q in the final reading. That was an encouraging sign for growth trends ahead as the total business investment jumped 3.3% (was 0.7%) in the first quarter, which implies businesses are sufficiently optimistic about the outlook to invest more. Imports as well as exports contracted, but less than estimated previously.PPI & Core (USD, GMT 12:30) – We expect June PPI gains of 0.2% for both the headline and the core, after May swings of -0.3% for the headline and 0.2% for the core. As-expected readings would result in the y/y headline PPI metric easing to 0.5% from 1.1%, versus an all-time high of 11.7% in March of 2022. We expect the y/y core measure to fall to 2.7% from 2.8%, versus an all-time high of 9.7% in March of 2022. The y/y calculation has fallen sharply through mid-2023 as comparisons have 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. Now as prices unwind, the trade price measures have fallen sharply, with ensuing weakness in PPI and CPI that will extend through 2023.
Friday – 14 July 2023
Michigan Consumer Sentiment (USD, GMT 14:00) – The Michigan Sentiment report is expected to grow slightly to 64.8 from 64.4.
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Andria Pichidi
Market Analyst
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