Weekly Market Outlook (24-28 July)

UPCOMING EVENTS:

Monday:
EZ-UK-US PMIs.

Tuesday:
US Shopper Confidence.

Wednesday:
Australia CPI, FOMC Coverage Determination.

Thursday:
ECB Coverage Determination, US Jobless Claims, US Q2 GDP.

Friday:
BoJ Coverage Determination, US PCE, US ECI.

Monday:
The Eurozone Manufacturing PMI is predicted to tick decrease to 43.3 vs. 43.4
prior, whereas the Providers PMI is seen at 51.4 vs. 52.0 prior. Eurozone
financial knowledge began to constantly shock to the draw back these days which
indicators a potential recession hitting the financial system in H2 2023 and the ECB ending
its charge hike cycle.

The UK Manufacturing PMI is predicted at
45.9 vs. 46.5 prior, whereas the Providers PMI is seen at 53.0 vs. 53.7 prior. This
sample of contractionary Manufacturing Sector and expansionary Providers Sector
has been the theme of this tightening cycle and what’s most likely delaying the
recession because the Providers Sector is much less delicate to charge hikes.

The US Manufacturing PMI is predicted a
contact greater at 46.4 vs. 46.3 prior, whereas the Providers PMI is seen a contact
decrease at 54.0 vs. 54.4 prior. A draw back shock ought to weigh on the USD as
the decrease US inflation readings are nonetheless recent available in the market’s thoughts and will
trigger one other dovish repricing in rates of interest expectations. On the flip
facet, an upside shock ought to give the USD some assist because the market might begin
to cost in one other charge hike.

Tuesday:
The US Shopper Confidence is predicted at 113.0 vs. 109.7 prior. The final
month, we noticed an enormous upside shock in
the report leaping from 104.0 to 109.7. The US Shopper might really feel extra upbeat
on account of a powerful labour market, decrease inflation (vitality deflation elevated
disposable earnings) and better inventory market. In truth, the current state of affairs
index within the Shopper Confidence report is seen as a number one
indicator for the labour market and it jumped
from 146.8 to 155.3 the final month. The upper inventory market costs, on the
different hand, have a constructive wealth
impact that retains the labour market robust
and client spending wholesome.

Wednesday:
The Australia CPI Y/Y is predicted at 5.4% vs. 5.6% prior, whereas the CPI Q/Q is
seen at 1.0% vs. 1.4% prior. The RBA’s most popular measures of inflation, the
Trimmed Imply and the Weighted Imply, are seen all decrease. The Trimmed Imply
Y/Y is predicted at 5.9% vs. 6.6% prior, whereas the Q/Q determine is seen at 1.0%
vs. 1.2% prior. The Weighted Imply Y/Y is predicted at 5.4% vs. 5.8% prior, whereas
the Q/Q studying is seen at 1.0% vs. 1.2% prior. The Australian
Jobs report final week beat
expectations throughout the board, and it tipped the expectations in favour for
one other charge hike, however a miss within the inflation report might give the RBA an
excuse to maintain the money charge regular. As a reminder, the RBA’s inflation
goal is 2-3% every year.

The Fed is predicted to hike by 25 bps and
convey the FFR to five.25-5.50%. The market has already baked on this charge hike,
so it received’t be a shock in any respect. In truth, the market will focus extra on
hints for the subsequent transfer as in the meanwhile the Fed is seen as carried out with this July
enhance. In my view, it’s unlikely that the Fed will pre-commit to something
at this assembly as they continue to be knowledge dependent and the latest decrease Core
inflation studying ought to enhance their hopes for a gentle touchdown. They may
additionally see two extra NFP and CPI studies earlier than the September assembly, so I
suppose this assembly is prone to be probably the most boring one of many yr.

Thursday:
The ECB is predicted to hike by 25 bps and produce the deposit charge to three.75%. This
charge hike was pencilled in already on the final
ECB charge resolution as President Lagarde
mentioned that “inflation is projected to stay too excessive for too lengthy” and that
there was nonetheless “extra floor to cowl”. In truth, all of the ECB audio system have been
repeating week after week that they may hike on the July assembly and that the
stronger debate will centre on the September resolution, which will likely be a lot
extra knowledge dependent. In truth, we’re unlikely to see any pre-commitment at
this assembly because the ECB is prone to simply stress their knowledge dependency and
resoluteness to convey inflation again to focus on.

The US Jobless Claims report retains on
being probably the most market-moving occasions because the labour market continues to be
on the prime of the market’s focus. Final
week, we noticed one other massive beat in Preliminary
Claims that despatched the US Greenback greater throughout the board, whereas Persevering with Claims
ticked greater, though they lagged by one week the Preliminary Claims. As a
reminder, the final week Preliminary Claims knowledge coincided with the NFP survey week.
This week Preliminary Claims are anticipated at 233K vs. 228K prior, and the
Persevering with Claims are seen at 1742K vs. 1754K prior.

Friday:
The BoJ is predicted to maintain its financial coverage unchanged with charges at -0.10%
and YCC to flexibly goal 10yr yields inside -/+ 0.50% goal band. The BoJ
will even launch its Outlook Report the place the central financial institution is predicted to revise
greater its inflation forecasts. There have been some expectations coming into this
assembly that the BoJ may tweak its YCC coverage, however these have been trumped first
by dovish Governor Ueda’s feedback and ultimately by a Reuters
report final Friday saying that the BoJ was
leaning in the direction of protecting yield management coverage on the upcoming assembly.

The US Core PCE M/M is predicted at 0.2%
vs. 0.3% prior whereas there’s no expectation for the Y/Y determine in the meanwhile,
though the Cleveland Fed Inflation Nowcast factors to a 4.2% studying vs. 4.6%
prior. The market is prone to focus extra on the US Employment Value Index (ECI)
although which is predicted at 1.1% vs. 1.2% prior.