- MON: BoJ Tankan Survey (Q2), China Caixin Manufacturing PMI (Jun), Swiss CPI (Jun), EZ/UK/US Final Manufacturing PMI (Jun), US ISM Manufacturing PMI (Jun). June)
- Tuesday: RBA Announcement, NBH Announcement, South Korea CPI (June), German Trade Balance (May),
- married: FOMC Meeting Minutes, China Caixin Services PMI Final (Jun), EZ/UK/US Services & Composite PMI Final (Jun), US Durable Goods R (May)
- Thursday: NBP Announcement, Australian Trade Balance (May), EZ Retail Sales (May), US National ADP Employment (Jun), US ISM Services PMI (Jun)
- Republic of Macedonia: German Industrial Output (May), US Jobs Report (Jun), Canadian Jobs Report (Jun)
Note: Previews are listed in daily order
BoJ Tankan survey (Monday): According to a recent Reuters poll, Japanese factory sentiment is expected to improve in the second quarter for the first time since mid-2021, largely due to the relaxation of the auto chip supply crisis. Despite the global downturn in demand affecting manufacturers, the service sector is expected to grow above pre-pandemic levels, driven by an increase in tourism. The confidence index for major manufacturers is expected to rise to 3 in June from March 1, according to the median estimate, marking the first growth in seven quarters. Meanwhile, the mood among non-manufacturers is expected to be higher due to strong inbound tourism and the COVID-19 reclassification for the fifth consecutive quarter. Manufacturers’ sentiment is expected to improve further over the next quarter, while the services sector may see a slight decline due to higher consumer inflation. The survey is also expected to show that large companies plan to increase capital spending by 10.1% this fiscal year, much higher than the 3.2% increase projected in the March survey.
US ISM Manufacturing PMI (Monday)The manufacturing gauge is expected to rise to 47.2 in June from 46.9 in May. However, looking at the S&P Global Purchasing Managers’ Index series for comparison, manufacturers saw production contracting in the month, with output falling at the sharpest rate since January. New orders for manufacturers also fell sharply, S&P said, reflecting weak customer confidence and declining customer inventories. Manufacturers’ expectations were clouded by concerns about inflation and lower sales, which was reflected in confidence falling to a six-month low in Standard & Poor’s PMI data.
RBA Announcement (Tuesday): The Reserve Bank of Australia will hold its policy meeting next week and analyst expectations point to currency flipping with 16 out of 31 economists polled by Reuters expecting another 25 basis points and 15 expecting a pause at the current level of 4.10%, while money markets are more decisive They are pricing in only a 37% chance of a 25 bps rate increase and a 63% chance of keeping prices unchanged. As a reminder, the RBA defied consensus on pauses in rates at the previous two successive meetings, instead opting to continue with 25bp rate hikes, while at the June meeting signaling that its actions were in response to a rising inflationary environment. This data indicates that upside risks to inflation expectations have increased. The statement remained hawkish and largely echoed last month’s rhetoric with the council remaining firm in its determination to bring inflation back on target and further tightening in monetary policy may be needed, while also reiterating that inflation in Australia has passed its peak, but remains very high at 7% and it will take some time before it is back within the target range. The meeting and subsequent comments by officials initially prompted some hard-line revisions to rate expectations, including Goldman Sachs raising its view of rates to a peak of 4.85% in September from an earlier view of 4.35% in July, while NAB revised its call for rates to a peak. at 4.60% from 4.35% through consecutive hikes in July and August. However, this optimistic momentum eventually faded two weeks later after meeting minutes revealed that the board considered a rate hike of 25bp or flat and the arguments were well balanced, while weaker-than-expected monthly inflation data from Australia. which slowed to 5.60% vs. Exp. 6.10% (previously 6.80%) adds to the RBA’s case for a stand. Still, another surprise rally cannot be ruled out as inflation is still far from the central bank’s target range of 2-3% bearing in mind that the central bank bucked the consensus stop at the last two meetings.
FOMC Meeting Minutes (Wednesday)The Fed held interest rates steady in June as expected, but surprised markets by raising its rate forecasts for 2023 and beyond. Projected rates for 2023 have been increased by 50 basis points, suggesting two more rate hikes of 25 basis points. The tougher outlook was driven by a better outlook for GDP growth, higher inflation expectations, and a lower projected unemployment rate. Despite upward adjustments, the long-term “neutral” price remained unchanged. Fed Chair Powell acknowledged the progress made, but stressed that the impact of the tightening policy has not yet been fully realized. While most policy makers expect further price hikes, they expect continued weak growth. Powell noted signs of an improvement in the balance of supply and demand in the labor market, although demand still exceeded the available labor force. Inflation remains above the 2% target, but is moderate; Powell warned that lowering inflation may require below-trend growth and adjustments in the labor market. During his Q&A, he referred to the decision not to raise interest rates as a “skip,” hinting at the possibility of a rate hike in July. He stressed the need for a more moderate pace of stress. Powell said a rate cut was unlikely and expressed limited concerns about the impact of banking turmoil. He discussed potential challenges in commercial real estate and predicted a decline in the RRP and reserves during the rebuilding of the TGA. Since the meeting, Chairman Powell has reiterated that it would be appropriate to raise interest rates at least twice (in line with the Fed’s expectations), stating that incoming data will be the influencing factor; He also said that the majority of Fed officials support two rate hikes.
US ISM Services PMI (Thursday): The services measure is expected to improve only slightly in June, with the consensus looking for a rise to 50.5 from 50.3 in May. The outlook for the service sector is brighter than its industrial counterpart. The S&P Global PMI data said service sector companies continued to show strong growth, which contributed to the general expansion in the private sector. While the rate of expansion in the services sector slowed from a high the previous month, new business from abroad remained strong. “The question remains about how resilient the growth of the services sector will be in the face of deindustrialization and the delayed impact of previous interest rate hikes,” S&P Global said, adding that “any further price increase would of course have another dampening effect on this sector which is particularly sensitive to changes in Borrowing costs.
US Jobs Report (Friday): May’s JOLTS data and weekly Initial Jobless Claims series will help shape sentiment in the labor market as we move into the BLS’ more defining Employment Situation report. For the JOLTS series, even though it’s an old version (we’ll have NFP data for June, though JOLTS data for May), it’s still impressive; Last month’s data for April, for example, had a surprise run up, prompting a hawkish market reaction. Meanwhile, for Initial Jobless Claims data, Moody’s notes that it has fallen in the most recent week, although the four-week average is still close to breakeven (Moody’s puts this at around 265K), adding that it would be important to note A sustained increase in the level of claims is likely to indicate a slowdown in monthly job gains. In terms of the BLS Employment Situation report itself, the consensus is currently looking to add 200K payroll (vs 339K previously), with the unemployment rate unchanged at 3.7%. Average hourly earnings are expected to increase by 0.3% month over month, matching the rise seen in May. Moody’s says that while it expects to see continued signs of a slowdown in the labor market from the data, it likely won’t be enough to prevent the FOMC from resuming rate hikes in July. The market currently expects the central bank to raise interest rates by 25 basis points in July – Fed Chair Powell himself has hinted at rate hikes at least twice, a view he says is shared by a solid majority on the committee.
Canadian Jobs Report (Friday)At the moment, there is no forecast for next week’s jobs report but it will help set the outlook for the BoC’s July meeting. The Bank of Canada resumed its rate hike cycle in June after keeping interest rates on hold since January, with the board deciding that policy was not restrictive enough to rebalance supply and demand and return inflation to the 2% target. Since the BoC meeting in June, Canada’s May jobs report came in sharply below expectations with a 17k payroll decline, led by a 33k drop in full-time jobs. Meanwhile, inflation came in cooler than expected in core measures at 3.7% while the BoC’s three core measures average eased to 4.3% from 4.7%, but still above the BoC’s 2% target. Markets are currently looking at a 60% probability of another 25bps rally in July, and this report could help solidify expectations with market pricing easing somewhat after the subdued inflation report. However, analysts at ING noted that decent growth, a tight jobs market, set to be confirmed by upcoming jobs data, and steady inflation mean they expect another BoC increase in July.
This article originally appeared Newsquack