Key Events And Catalysts In The Week Ahead
Goldman's Thomas Stolper, who still has a 1.50 target (or maybe higher, we forget) on the EURUSD, summarizes the key catalysts in the upcoming week.
China activity data: Following the June CPI print, which saw inflation rise to 6.4% yoy, in line with our above-consensus forecast, we will be looking for above-consensus activity readings for Q2 GDP and June industrial production.
Eurogroup meeting and bank stress tests: This will be an important policy week for Europe. On Friday, the IMF approved its disbursement to Greece under the old EU/IMF program of EUR110 bn agreed in 2010. Discussions at the Eurogroup meeting will center on the financing of a new program, which is supposed to close the financing gap for Greece for 2012 and 2013. The role of private sector involvement remains a key issue. The week also brings a bond auction for Italy on Thursday, for an estimated EUR7 bn. The week ends with the publication of the EU-wide bank stress tests on Friday. Summary results will be published at 6 pm CEST, with bank-by-bank results following thereafter.
Bernanke testimony: In his semiannual monetary policy testimony, Fed Chairman Bernanke is likely to repeat the basic message from his recent press conference—namely that labor market performance has been disappointing but that inflation remains too high to combat the weakness with additional monetary easing.
Eurogroup meeting: see above
Indonesia central bank meeting: We expect Bank Indonesia to pause again, in line with consensus, following its decision to remain on hold in the last four policy meetings since March. We expect the central bank to hike the policy rate by another 50 bp for the remainder of this year.
Singapore GDP (Q2): Our forecast is for a moderation in 2Q2011 GDP growth to 2.8% yoy from 8.3% yoy in 1Q2011, as indicated by the slowing in the monthly activity indicators so far. This is above consensus, which is at 1.0% yoy. We expect a subsequent recovery to above-trend levels of around 5.5% for 2H2011.
India industrial production (May): We expect the May Industrial Production Index to grow at 8.5% yoy, higher than 6.3% yoy in April, mainly due to the lower base of last year and slightly better performance of the infrastructure index. Consensus expects a reading of 8.7% yoy.
Japan central bank meeting: We think the BOJ is likely to raise its economic assessment at the July 11-12 MPM. We expect policy to remain unchanged, with no additional easing. However, we expect external demand and nationwide electricity supply concerns to be cited as risks.
UK CPI (Jun): We expect CPI inflation to edge slightly lower from +4.5% to +4.4%yoy. That said, on our forecast path (which assumes the hike in gas and electricity bills, announced by an additional utility company this week, will become the industry standard), inflation will not peak until the autumn - at a level close to 5%. Consensus expects inflation to remain unchanged at 4.5% yoy.
United States trade balance (May): We expect the trade deficit to widen to -$48.0 bn, above consensus of -$44.1 bn and up from -$43.7 bn in April.
United States FOMC minutes
China GDP (Q2): We expect 2Q 2011 GDP growth to fall to 9.4% yoy, down from 9.7% yoy in 1Q2011. This is slightly above consensus (9.3% yoy).
China industrial production (Jun): We believe June industrial production growth could rise to 13.6% yoy, up from 13.3% yoy in May. This is above consensus, which expects a decline to 13.1% yoy in June.
Thailand central bank meeting: We expect a 25 bp hike at the upcoming meeting, in line with consensus. The various populist policies proposed by the incoming government will likely add to further inflationary pressures and keep the Bank of Thailand on its rate hike cycle.
Bernanke delivers Semi-Annual Monetary Policy Report: In his semiannual monetary policy testimony, Fed Chairman Bernanke is likely to repeat the basic message from his recent press conference—namely that labor market performance has been disappointing but that inflation remains too high to combat the weakness with additional monetary easing (July 13, 14).
South Korea central bank meeting: We continue to expect a 25 bp hike in August followed by hawkish remarks in the July Monetary Policy Committee meeting, although we would not rule out a surprise hike at the upcoming meeting. Consensus expects the central bank to remain on hold.
India WPI (Jun): We expect June WPI inflation to come in at 9.7% yoy, higher than 9.1% yoy in May, mainly due to a rise in prices of food articles, especially poultry products. This is in line with consensus.
United States retail sales (Jun): Monthly retail sales are likely to have fallen in June, partly for disappointing reasons (lower vehicle sales) and partly for good ones (lower gasoline prices that reduced fuel expenditures). We expect headline retail sales to fall 0.5% mom, below consensus which expects a flat reading.
Euro zone CPI (Jun): We expect inflation to read 2.7% yoy, unchanged from the May reading and in line with consensus.
Italy 5-year bond auction: see above
United States CPI (Jun): Consumer prices probably edged down in June, but the core index is likely to log another increase of around 0.2%. We expect headline to fall -0.3% mom, below consensus which sees a fall of -0.1% mom.
United States Empire manufacturing survey (Jul): Consensus expects a reading of 5.00, up from -7.79 in June.
United States University of Michigan consumer confidence (Jul): Consensus expects a rise in this preliminary reading to 72.5 from 71.5.
EU bank stress tests: The 2011 test will feature a harsher methodology, including core – not headline – Tier 1 (CT1) capital forming the base, the hurdle rate being tougher at 5% CT1, and the disclosure of capital composition allowing effective comparisons
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