A Look At Events In The Week Ahead: Less Headline Risk, More ECB Rate Hikes

Tyler Durden's picture

From Goldman Sachs

Last week was a good week for risk sentiment with almost all of the major hurdles taken successfully. The Greek Parliament voted in favour of the reform package as well as the implementation laws. The Eurozone has already approved the disbursement of the 5th tranche of the initial support package and the IMF is likely to follow with approval. On the activity side, the Chicago PMI and the Manufacturing ISM all came out much stronger than expected. Not every single news item was positive though. The composition of the ISM showed a big rise in the inventory component. Moreover, a number of regional business surveys from Europe, China, and the Japanese Tankan all failed to show the improvements visible in the US data. The Turkish trade deficit remained shockingly wide.

Still, against the backdrop of improving US data and the Greek votes, risky assets performed well across the board. In the middle of the week, we added more pro-cyclical risk via a long AUD/JPY recommendation, as well as short position in 5-year Treasuries and a long recommendation in our GS Wavefront Growth basket. Our FX recommendations generally performed well in this environment, with the Dollar TWI declining by about 1.5% in the second half of the week. As one of our core views we expect more USD weakness and we remain positioned via a number of Asian and European crosses (short USD versus CNY, PHP, MYR, EUR, NOK).

In the week ahead, we are waiting for the second batch of key activity data in the form of service sector and non-manufacturing surveys, as well as US payrolls. The Chinese non-manufacturing PMI has already been released over the weekend, showing a decline from 61.9 to 57.0.

After last week's key votes in Greece, headline risk should decline though we are now entering the phase where the final negotiations for the second support package take place. The updated funding strategy for Greece will likely be unveiled by Eurozone Finance Ministers on July 11.

There will be central bank meetings by the ECB (+25bp), BOE (on hold), in Malaysia (+25bp), Mexico (on hold), and Poland (on hold).

Monday 4 July

Turkey CPI (June): Given the huge imbalances in Turkey currently and strong demand growth, inflation will likely remain relatively high. Consensus expects +7.0% yoy after +7.2% in May.

UK Construction PMI (June): Last month's reading was 54.0. Consensus expects a basically stable reading at 53.8.

Also Interesting: Swiss retail sales.

Tuesday 5 July

Sweden Risksbank Meeting: In line with consensus, we expect a repo rate increase of 25bp to 2.0%. Since the April hike from 1.5% to 1.75%, developments have broadly been in line with the Riksbank’s expectations; however, the recent weakening in US data, and to some extent European business surveys (including the Swedish PMI), has probably been sharper than anticipated. However, this is likely to be insufficient for the Riksbank to hold off from the July hike pencilled in to its forecast rate path.

Eurozone Services PMIs (June): In line with other indicators and given the preliminary readings, we and consensus expect the final services PMI to decline to 54.2.

UK Services PMI (June): Last month's reading was 53.8. Consensus expects a basically stable reading at 53.5.

US Factory Orders (May): After an encouraging durable goods orders report, factory orders may add to the positive activity news. We expect +1.4% after -1.2% in April and compared to consensus at +1.0% mom.

Russia CPI (June): We and consensus expect a very gradual stabilisation in sequential inflation to +0.3% mom from +0.5% mom in the previous month. Annual inflation rates remain high at close to 10%.

Also Interesting: Philippines inflation.

Wednesday 6 July

US Non-manufacturing ISM (Jun): The Institute for Supply Management’s survey for the non-manufacturing sector should regain a bit more ground in June (GS: 54.0, consensus: 53.5, May: 54.6).

Poland Monetary Policy Meeting: We expect rates to remain unchanged at 4.50%.

Germany Manufacturing Orders (May): After the recent weakness in European business surveys, the order data will likely come out softer than in April (GS: -0.3% mom, April: +2.8%).

Also Interesting: Spain industrial production, UK labour market data.

Thursday 7 July

Japan Machinery Orders (May): Based on the latest monthly Tankan numbers, which showed improving demand, we expect May machinery order data to show a swing to +3.2% mom growth. In part, this would be a rebound from the 3.3% decline in April that was well below the market consensus of +2.2%.

Taiwan Trade Data (June): As one of the most timely indicators of global activity, we will have a close look at this data point. Last month, export growth ran at a rate of 9.5% yoy. Consensus expects a rebound to +19.1%.

Malaysia Central Bank Meeting (June): Consensus expects a hike by 25bp to 3.25% in response to rising inflationary pressures. We think additional FX appreciation will also be part of the policy mix.

Germany Industrial Production (May): Both the business surveys and our leading indicator of IP suggest that the pace of the industrial recovery across the Euro-zone slowed in late Q2. We expect this to be reflected in this week’s official data (GS: +0.2%, consensus: +0.7% mom).

ECB Meeting (July): We expect the ECB’s Governing Council to hike the refinancing rate from 1.25% to 1.50%. At the last meeting, a unanimous ECB hinted at an interest hike in July, and the rhetoric unambiguously signalled the resumption of ‘hiking cycle’ mode. Speaking to the European parliament last week, ECB President Trichet reiterated that the ECB was “in a state of strong vigilance.”

UK MPC Meeting (July): We expect no change. The MPC was split three ways in June (with new entrant Ben Broadbent voting for unchanged rates), and the minutes emphasised concerns over the Euro-zone sovereign debt crisis and the loss of momentum in global growth. Some of the six swing voters specified that further asset purchases may become warranted, and Paul Fisher in particular was reported as saying “QE is very much on the table.” We continue to expect a rate hike in November, though the risks are now skewed almost exclusively towards a later start to monetary policy tightening.

US ADP Employment Report (Jun): After last month's increase of +38k, consensus expects further growth in ADP payrolls of +70k.

US Weekly Unemployment Claims: Consensus expects a very small improvement to +420k from +428k last week. New Zealand Q1 GDP, Mexico CPI.

Also Interesting: Swiss CPI, industrial production in Norway, UK.

Friday 8 July

US Non-Farm Payrolls and Unemployment Rate (Jun): Employment growth should pick up somewhat after a very disappointing May. We expect 125,000 non-farm payroll jobs (consensus: +85k, May +54k) and a small drop in the unemployment rate to 9.0% (consensus: 9.1%, May: 9.1%).

Mexico Banxico Meeting: We expect rates to remain unchanged at 4.50%.

Also Interesting: Swiss unemployment rate, Industrial production in Italy, Sweden, Turkey

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DavidC's picture

And my same question as previously. WHY?


Atomizer's picture

Press Conference on the Concluding Statement for Annual Report on U.S Economy


KoRn - Lies


I want you to see, master of disguise. For all the things that hurt
you, of all these useless lies. I want you to feel, feel you on up
inside. Once I'd took you in, I'd throw you out instead.

Quackking's picture

I hope the events this week include lots of goodness relating to the DSK/Sofitel whore/Sarkozy story. Especially since I followed up on this comment thread


Num Tip Sanya · London

Frank Wisner who is the step-father of Nicholas Sarkozy (the French Prez) is a lifelong buddy of Cyrus Vance Snr, the father of the DA, Cyrus Vance Jnr. Just happens that Sarkozy benefits if Strauss-Kahn is incarcerated.

Frank Wisner works for the CIA.



to this story http://www.nypost.com/p/news/local/manhattan/cy_team_ignored_warnings_md... in the NYPost.


Hmm. Sure enough, Wisner Jr. *is* the step father of Sarkozy (and he was also on the board of an *Enron* subsidiary - imagine that!)


And the half brother Olivier Sarkozy (that Wisner is the father of, don't get confused by all this, folks) seems to be a wiggy sort of big wig too: (from Wikipedia page on Olivier, Nicholas Sarkozy's half-brother):"On March 3, 2008 Sarkozy was appointed to be the Co-head and Managing Director of the Carlyle Group's Global Financial Services Group."


Move along. Nothing to see here.


Atomizer's picture

Its very strange too watch. Gravey train just wants lifetime Severance to reward the string pulling efforts. Shakes my head..


Caviar Emptor's picture

Paradoxically, I believe we now head into choppy waters. Critical decisions have been made, now we have to live with them. That's always more difficult when consequences and ripple effects start to pop up. Doubts will be on the rise about decisions that were taken out of convenience and wishful thinking. Some will begin to see themselves as being on the losing side. Denial will slip away. 

Stax Edwards's picture

Hello, where have you been for the last few years?  The NYT article is not the beginning, it signifies the beginning of the end of this mess. Let me guess, you approve only bail outs of corporations and bankers?  This is risk on, IMHO

buzzsaw99's picture

Next week will be boring. The week after brings a lot of earnings, including JPM - 14th, C - 15th (8 a.m. ET if you want to get up early for smoke to be blown up your ass). The Old Lane welfare king maggot himself will be doubtless be lying like a freaking dog.

Spitzer's picture

Jeffery Christians year end price targets for gold and silver

$1400 gold

$26 silver


Atomizer's picture

Every summer brings a Gold/Silver selloff. It never matters because we are holding PM. :)

Spitzer's picture

but these are his year end targets, I think he's dreaming. I know the summer selloff is on, that is irrelevant.

$1400 gold and $26 silver is a bold statement. I would say $1780 on gold and $55 on silver

Jack Napier's picture

As JPM is the custodian for SLV, the owner of the vast majority of silver shorts, and the owner of silver vaults that did not need to go through the appropriate approval process they have a closed circuit on the whole cycle. They can deliver on their silver shorts to their own vaults and whether or not any of it truly exists is irrelevant. I would not be surprised to see them hold things down for as long as the global ponzi scheme is allowed to perpetuate.

The way to beat them is when physical silver actually hits a supply shortage. Buy as much as you can afford to park on the sidelines and wait for the inevitable. If you bought at $40 instead of $20 you won't care much when it reaches $1,000. Of course selling at any price in a hyperinflationary environment is foolishness anyway as it could go up exponentially. Gold and silver are money. Everything else is currency.

Spitzer's picture

Im not much of a silver guy but $1400 gold at the end of 2011 ?

That is $90 less then the current summer price now. He is fucked, with real interest rates below zero around the world(even China) there is no way gold is going to rise less then 10% a year.

Atomizer's picture

Last post for tonight. The playbook has been seeded. Lets watch how the Government moles will react to American thinking. TV will play a strong role in peasant suppression. "Support Propaganda or Eat Fear".. LOL

Yuri Bezmenov


time123's picture

The ECB wants to hike rates end of this week, but they better keep the liquidity going to avoid more problems with banks.



admin at http://invetrics.com

cdevidal's picture

Why hasn't anyone mentioned today's U.S. bond auctions? That's where my interest will be focused, now that QE2 is over.