Goldman Sachs summarizes the key events in what promises to be a most exciting week:
First and foremost, last week was marked by substantial political volatility in Greece. After intense political workings over the week that almost caused government instability, a new cabinet was appointed on Friday (June 17) and the Prime Minister will seek a vote of confidence in the parliament over the next few days and no later than Tuesday, June 21 (as local press reports). Should the vote be successful, it would pave the way for the approval of the new austerity measures over the following few days and remove hurdles towards the disbursement of the next IMF/EU tranche of the existing program. The Prime Minister also continues to invite the main parties to overcome their divisions and work on a national consensus.
The Eurogroup Finance Ministers are meeting Sunday night and Monday (June 19-20), while a G7 conference call on Greece is scheduled for Sunday night as well. Germany has already softened its position regarding private sector participation in a second Greek support package. More headlines with respect to the Greece rescue can be expected in the coming days. The upcoming week will also be marked by the EU summit of Heads of State towards the end of the week.
Beyond Greece the two key events are the FOMC meeting and press conference, which will be interesting, given the Fed currently faces a challenging deterioration in the growth-inflation trade-off.
Finally, cyclical data disappointed last week, further adding evidence of a "soft patch" with the Philly Fed and the U of Michigan consumer confidence reports printing below consensus. Next week, we will find out whether European survey data and US durable goods orders confirm this trend of cyclical deceleration or whether they point to cyclical divergence across the Atlantic.
Overall, we maintain a reasonably constructive stance across our FX recommendations, with long exposure in Asia (PHP, MYR, CNY), and expect further broad Dollar weakness. This also includes EUR/$ where the currently emerging compromise on additional Greek funding and reforms should warrant a gradual decline in the fiscal risk premium. Finally, we remain concerned about the current account position in Turkey and will watch the CBRT meeting on Thursday (June 23). [Translation: Goldman is now desperate to get its clients to short the USD...]
Hungary Monetary Policy Meeting: We expect no change from 6.00%, in line with consensus.
Second day of the Eurogroup/Ecofin Meeting on Greece
Taiwan Export Orders (May): Latest manufacturing data out of the US had been softer than expected. This is consistent with the slower momentum seen in Taiwan’s export data recently. We would also keep an eye on the supply-chain disruptions in Japan.
US Existing Home Sales (May): We expect no change vs. consensus of -5.0% mom after -0.8% in April.
Greece Confidence Vote: A positive outcome would pave the way towards the voting of the medium-term fiscal austerity package. [ZH: and a negative vote means the bankers lose]
RBA Minutes: After a significant decline in interest rate expectations by the market it is interesting to watch the RBA’s stance closely.
Also Interesting: South Africa Current Account.
US FOMC Meeting: We expect no change, in line with consensus. The Federal Open Market Committee is stuck between a rock (slow growth) and a hard place (higher inflation). We expect Chairman Bernanke to indicate at the FOMC press conference that there is little prospect of either monetary tightening or monetary easing anytime soon.
Norway Monetary Policy Meeting: We expect no change from 2.25%, in line with consensus, after the 25 bp hike at the last meeting.
BOE Minutes: It will be interesting to see if there has been any change in the voting pattern following the softer patch in the data.
Malaysia CPI (May): We continue to expect rising inflationary pressures, underpinned by a robust domestic demand recovery and against the backdrop of elevated global commodity prices. Consensus is looking for 3.3% yoy.
Also Interesting: Euroland consumer confidence, Poland/South Africa May CPI.
Euroland Flash PMI: Consensus expects both the flash Manufacturing as well as the flash Services PMIs to soften to 53.8 and 55.5 after 54.6 and 56 in May, respectively.
Turkey Monetary Policy Meeting: We expect no change from 6.25%, in line with consensus, and will scrutinize the CBRT’s assessment of current account risks.
Czech Republic Monetary Policy Meeting: We expect no change from 0.75%, in line with consensus.
US Initial Jobless Claims: Consensus expects 410k after 414k the week before.
EU Summit: European Union Heads of State meet for a 2-day summit in Brussels.
Also interesting: Singapore May CPI, ECB Trichet Speech.
German IFO/Retail Sales: We expect 113 vs. consensus of 113.5 after 114.2. Also May retail sales will be released, for which consensus expects 1.0% mom after 0.3% in April.
US Durable Goods Orders (May): We expect 1.0% mom vs. consensus of 1.6% mom after -3.6% in April. Durable goods orders probably bounced back in May, as aircraft orders rebounded slightly.
US Q1 GDP (Final): Consensus expects 1.9% qoq annualized vs. 1.8% in the second estimate.
EU Summit: Final day of the 2-day meeting