Upcoming Events:
- Tuesday: Australian Wage Price Index, UK Labor Market Report, Eurozone ZEW Index, US NFIB Small Business Optimism Index, US Producer Price Index.
- Wednesday:Reserve Bank of New Zealand Policy Decision, UK CPI, US CPI.
- Thursday:Japan Q2 GDP, Australia Labor Market Report, China Industrial Production and Retail Sales, UK Q2 GDP, US Retail Sales, US Unemployment Claims, US Industrial Production and Capacity Utilization, NAHB Housing Market Index.
- Friday:New Zealand Manufacturing PMI, UK Retail Sales, US Housing Starts and Building Permits, US University of Michigan Consumer Confidence Index.
Tuesday
The Australian Wage Price Index is forecast to come in at 4.0% YoY versus 4.1% previously, while the Q/Q measure is forecast at 0.9% versus 0.8% previously. The RBA said wage growth appears to have peaked but remains above the level consistent with the inflation target.
Australian Wage Price Index YoY
The UK unemployment rate is forecast to be 4.5%, down from 4.4% previously. Average earnings excluding bonuses are forecast to be 5.4%, down from 5.7% previously, while average earnings including bonuses are forecast to be 4.6%, down from 5.7% previously.
As a reminder, the Bank of England cut interest rates by 25 basis points at its last meeting to 5.00%. The market is pricing in a 62% chance of no change at the next meeting and a total of 43 basis points of easing by the end of the year.
Unemployment rate in the United Kingdom
US PPI YoY is expected at 2.3% vs. 2.6% previously, while the monthly measure is expected at 0.2% vs. 0.2% previously. Core PPI YoY is expected at 2.7% vs. 3.0% previously, while the monthly reading is expected at 0.2% vs. 0.4% previously. The market will focus more on the US CPI release the following day.
US Core Producer Price Index YoY
Wednesday
The Reserve Bank of New Zealand is expected to cut its official cash rate by 25 basis points to 5.25%. The market has started to price in a cut at the upcoming meeting as the central bank moved to a more dovish stance in its latest policy decision. In fact, the Reserve Bank of New Zealand stated that “The Committee expected that general inflation would return to the target range of 1 to 3 percent in the second half of this year. Which was followed by the line “The Committee agreed that monetary policy will need to remain restrictive. The extent of this tightening will be eased over time in line with the expected decline in inflation pressures.”
Reserve Bank of New Zealand
UK CPI YoY is expected at 2.3% vs. 2.0% previously, while the monthly measure is expected at -0.2% vs. 0.1% previously. Core CPI YoY is expected at 3.5% vs. 3.5% previously. The weaker numbers are likely to add to market expectations of a sequential cut in September, but are unlikely to change much given that we will have another CPI report before the next BoE decision.
UK Core CPI YoY
The US CPI is expected to come in at 3.0% YoY vs. 3.0% previously, while the monthly measure is expected at 0.2% vs. -0.1% previously. The core CPI is expected at 3.2% YoY vs. 3.3% previously, while the monthly reading is expected at 0.2% vs. 0.1% previously.
This report will not change the market’s expectations for a September rate cut, because that is a given. What might change is the difference between a 25bp rate cut and a 50bp rate cut. In fact, the market is now basically evenly split between a 25bp rate cut and a 50bp rate cut in September.
If the data comes in better than expected, we should see the market pricing in a much higher probability of a 25bp rate cut. If the data comes in lower than expected, it should not make a big difference, but it would keep the odds of a 50bp rate cut intact for now.
US Core CPI YoY
Thursday
The Australian labour market report is expected to show 12.5k jobs added in July, up from 50.2k in June, and the unemployment rate unchanged at 4.1%. Although the labour market has softened, it remains somewhat tight.
The Reserve Bank of Australia delivered a more hawkish decision than expected last week, prompting the market to reprice a 46bp rate cut to 23bp by the end of the year. Barring any major surprises, the data won’t change much.
unemployment rate in australia
US retail sales are forecast to come in at 0.3% m/m vs. 0.0% previously, while auto sales are forecast to come in at 0.1% m/m vs. 0.4% previously. The control group is forecast to come in at 0.2% m/m vs. 0.9% previously. Although we have seen some softening, overall consumer spending remains stable.
US Retail Sales YoY
US unemployment claims remain one of the most important data to follow each week, as they are a more accurate indicator of the state of the labor market.
Initial claims remain within the 200K to 260K range that has been established since 2022, while continuing claims have been on a steady rise, indicating that layoffs are not accelerating and remain at low levels while hiring is more subdued.
Initial claims this week are expected to come in at 235,000 versus 233,000 previously, while continuing claims are expected to come in at 1,871,000 versus 1,875,000 previously.
Unemployment claims in the United States