Macroeconomics: The Day Ahead for 8 July

While the data and events schedule has a busy look to it, the likely market movers are probably few and far between, amounting to US weekly jobless claims, and the array of LatAm CPI readings from Brazil, Chile and Mexico. There are also UK RICS House Prices, Japan Economy Watchers (services) survey (rebounding very sharply), German Trade and Bank of France Industry Sentiment to digest. In event terms, Sri Lanka’s CBSL and Malaysia’s BNM held rates as expected, with no change expected from Poland’s NBP, though a hawkish tilt may emerge with some dissenting votes for a rate hike, as MPC members start to put pressure on dovishly inclined governor Glapinski to respond to what looks like a lot more than transitory inflation pressures. The FOMC minutes offered little in the way of fresh insights other than confirming that the majority saw inflation risk tilted to the upside, and agreement that a tapering discussion was now on the table – in other words, talking the talk, but not as yet walking the walk. As for the ECB’s strategy review result announcement today, sources confirm that it will offer no real surprises with a target of 2.0% and allowing an overshoot, in principle very similar to the Fed’s AIT, excepting that the ECB would under such a scenario have a great deal more catch up space, given that it has missed the target for the best part of 10 years. The measures related to climate change financing and related targets for its own and bank balance sheets may be of greater interest, though there will be a lot of questions about how this will be regulated in practice.

Elsewhere the minutes of last week’s Hungary MNB policy meeting could prove insightful in terms of the timing of the next rate hike, following last week’s initial 30 bps hike, as will today’s CPI data (seen easing slightly to 4.9% y/y from 5.1%). Yesterday’s above forecast Russia CPI data (June core CPI 6.6% y/y vs. May 6.0%) suggest a rate hike of 75 bps, perhaps even 100 bps, is likely at the July 23 Bank Rossi policy meeting.  The BoE’s Credit Conditions survey will be closely watched in terms of SME and housing credit demand and availability. The other central bank talking point will be China, where a former official yesterday suggested rate cuts might be needed as the economy slows in H2, state media reported the Cabinet recommending RRR (reserve requirement ratio) cuts to ‘support the real economy’, especially SMEs, and the PBOC this morning vowed to push real lending rates lower. But in immediate reaction terms it will be the renewed assault on cryptocurrencies and stable coins as a ‘threat to financial and social stability’, along with the confirmation that anti-trust measures imposed on Ant Financial will be imposed on other payments companies (most obviously this means Tencent’s WeChatPay), which will grab the headlines.

In the commodities space, BP’s Statistical Review of World Energy is likely to offer some insights on how it and other oil majors will need to respond in terms of climate change goal, above all given the recent shareholder and court orders for Shell and Exxon Mobil. While the seemingly endless drought in Brazil and its impact on the agricultural sector will be front and centre for today’s CONAB Grains & Beans and Coffee Council reports. A light day for government bond supply has auctions in Ireland and Canada.

U.S.A. – Weekly Jobless Claims 

After a much sharper than expected 51K drop to 364K (lowest since February 13 2020’s 256K), Initial Claims are forecast to post a more modest dip to 350K, though with more states terminating extended benefits programmes, the risks would appear to be to the downside. Continued Claims (for the prior reporting week) are seen dropping to 3.350 Mln (lowest since February 20, 2020’s 3.094 Mln) from 3.469 Mln. The question then is how this translates into July Payrolls that are seen rising 800-900K at the current juncture, though it will be the report in two weeks’ time (survey week) which will fine tune expectations, especially as it will come just ahead of the 27/28 July FOMC meeting.