Given last week's extreme moves in the market, one of the most important things this week will be Fed speakers responding to the meeting and subsequent market according to DB's Jim Ried, who adds that the big highlight - at least on paper - will be Fed chair Powell’s testimony tomorrow before the House select subcommittee on the Covid-19 crisis. However, Powell's discussion is expected to center on the Fed's policy response and we may not get too much FOMC insight.
Before that Bullard (non-voter, dove) who sparked Friday's selloff with his uber-hawkish comments, and Kaplan (non-voter, hawk) discuss the economic outlook today. They both have expressed a preference for liftoff in 2022, though for somewhat different reasons. As noted above, Bullard rocked markets on Friday by suggesting his 2022 core PCE inflation forecast of 2.5% as justifying a hike in late 2022, whereas Kaplan has recently focused on financial stability concerns. So there might not be much more for these guys to say today but New York President Williams (voter, dove) later this afternoon might have fresh views especially on the taper given the responsibility for the Fed’s balance sheet that his region has.
Before Powell tomorrow, San Francisco's Daly (voter, dove) and Cleveland's Mester (non-voter, hawk) will be speaking at separate events while on Wednesday, we will hear from Fed Governor Bowman (neutral), Atlanta President Bostic (voter, neutral) and Boston's Rosengren (non-voter, hawk). Bostic will appear again on Thursday alongside Philadelphia's Harker (non-voter, hawk), the latter of which has also been a proponent of tapering asset purchases sooner rather than later. We’ll also have repeat performances from Williams, Bullard, Kaplan and Mester over the week.
So, as Reid wraps up, plenty of potential market moving jawboning: the Fed were very coordinated in playing down inflation risks after the first mega CPI print six weeks ago so it’ll be interesting if they all sing from the same song sheet this week. I can’t help thinking that the debate is starting to liven up at the Fed now but will the last few days of market moves scare them?
Moving onto the data the biggest highlight will be the release of the June flash PMIs on Wednesday from around the world, which will give us an initial indication of how the global economy has performed into the end of Q2. The final May PMIs showed that growth was still maintaining decent momentum, with the Euro Area composite PMI coming in at 57.1, the strongest in over 3 years, while the US composite PMI was at 68.7, which is the strongest since the data goes back to in October 2009. Another release of note will be the German Ifo’s business climate indicator for June (Thursday), which rose to a 2-year high last month of 99.2.
Friday will be a key day with inflation being dissected within the US personal income and University of Michigan releases. Clues to Core PCE will be the key in the former with the 5-10 year inflation expectations important on the latter. On this, May’s number dipped 0.2% from April’s 3%. So all eyes on this.
The main monetary policy decision this week comes from the Bank of England on Thursday, where economists generally expect the MPC to remain cautiously optimistic around the recovery, keeping the policy rate on hold at 0.1% and maintaining the target stock of QE at £895bn - stronger growth, labor market and inflation data thus far should tilt the policy statement in a slightly more hawkish direction than in May. Nevertheless, something else to watch out for in the UK will be the latest data on Covid-19, as the spread of the delta variant has led to a noticeable rise in cases and hospitalizations over recent weeks, albeit still at relatively low levels compared to earlier in the year. Russia, Germany and Portugal have now also reported an increasing spread of Delta with a big story in the FT today about the variants small but growing footholds across Europe. This will capture some attention. The rest of the week’s main events will be in the day by day list at the end.
Turning to politics, French President Macron and far-right leader Marine Le Pen both are likely to have fared poorly in a regional election in France where the turnout was at an all-time low of c. 33% (vs. c. 50% in last election). According to an Ifop poll, Le Pen’s National Rally got 19%, c. 10 points behind her performance in the last election while, Macron’s party took only 11% and is not expected to win any regions. Better performances came from the Conservative party that likely received 27% of votes while the Greens are likely to be at 12%. To know more on how the outcome of regional elections can have an impact on the French Presidential election in 2022 read this note from our European economists (link here).
Day-by-day calendar of events for the coming week courtesy of Deutsche Bank
Monday June 21
- Data: US May Chicago Fed national activity index
- Central Banks: ECB President Lagarde, ECB’s Centeno and Fed’s Bullard and Williams speak
Tuesday June 22
- Data: UK May public sector net borrowing, Euro Area advance June consumer confidence, US May existing home sales, June Richmond Fed manufacturing index
- Central Banks: Fed Chair Powell, Fed’s Daly, Mester and ECB’s Rehn speak
Wednesday June 23
- Data: Flash manufacturing, services and composite PMIs for June from Australia, Japan, France, Germany, Euro Area, UK and US, Japan final April leading index, US Q1 current account balance, May new home sales
- Central Banks: ECB Vice President de Guindos, Fed’s Bowman, Bostic and Rosengren speak
Thursday June 24
- Data: Germany June Ifo business climate, US third reading Q1 GDP, preliminary May durable goods orders, weekly initial jobless claims, June Kansas City Fed manufacturing activity
- Central Banks: Bank of England monetary policy decision, ECB publishes Economic Bulletin, Fed’s Bostic, Harker, Bullard and ECB’s Panetta and Schnabel speak
- Politics: EU leaders meet in Brussels for European Council
Friday June 25
- Data: UK June GfK consumer confidence, Germany July GfK consumer confidence, Euro Area May M3 money supply, Italy June consumer confidence, US May personal income, personal spending, final University of Michigan consumer sentiment index
- Central Banks: Fed’s Mester and Rosengren speak
- Politics: European Council meeting concludes
Finally, focusing on just the US, The key economic data releases this week are the durable goods report and Q1 GDP revision on Thursday, and core PCE inflation on Friday. There are many speaking engagements from Fed officials this week, including New York Fed President Williams on Monday and Chair Powell’s testimony to Congress on Tuesday.
Monday, June 21
- 09:45 AM St. Louis Fed President Bullard (FOMC non-voter) and Dallas Fed President Kaplan (FOMC non-voter) speak: St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan will discuss the economic outlook in a virtual event hosted by the Official Monetary and Financial Institutions Forum. Q&A is expected.
- 03:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at a virtual event hosted by the Midsize Banking Coalition of America. Prepared text and Q&A are expected.
Tuesday, June 22
- 10:00 AM Existing home sales, May (GS -4.0%, consensus -2.4%, last -2.7%): We estimate that existing home sales declined by 4.0% in May after declining by 2.7% in April. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.
- 10:00 AM Richmond Fed manufacturing index, June (consensus +18, last +18): 10:30 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will discuss monetary policy and financial stability during a virtual workshop hosted by the Norges Bank. Prepared text and Q&A are expected.
- 11:00 AM San Francisco Fed President Daly (FOMC voter) speaks: San Francisco Fed President Mary Daly will speak at a virtual event hosted by the Peterson Institute for International Economics. Prepared text and Q&A are expected.
- 02:00 PM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will appear before a House select subcommittee hearing on the Covid-19 crisis to discuss pandemic emergency lending and the economy. Prepared text is expected.
Wednesday, June 23
- 8:30 AM Current Account Balance, Q1 (consensus -$206.5bn, last $-188.5bn)
- 09:00 AM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will speak at a conference on economic resilience hosted by the Cleveland Fed.
- 09:45 AM Markit Flash US manufacturing PMI, June (consensus 61.5, last 62.1): Markit Flash US services PMI, June (consensus 70.0, last 70.4)
- 10:00 AM New home sales, May (GS +0.7%, consensus +0.9%, last -5.9%): We estimate that new home sales increased by 0.7% in May, reflecting mean-reversion and a rise in starts but a slowdown in permits and mortgage applications.
- 11:00 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will discuss the impact of systemic racism on entrepreneurship. Audience and media Q&A is expected.
- 04:30 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will discuss the economy in a moderated Q&A hosted by the National Association of Corporate Directors. Audience Q&A is expected.
Thursday, June 24
- 08:30 AM Advance goods trade balance, May (GS -$86.7bn, consensus -$87.7bn, last -$85.7bn): We estimate that the goods trade deficit increased by $1.0bn to $86.7bn in May compared to the final April report, reflecting the tail end of stimulus-driven import strength and inventory restocking partially offset by firming seaborne exports.
- 08:30 AM Wholesale inventories, May preliminary (consensus +0.8%, last +0.8%): Retail inventories, May (consensus +0.4%, last -1.6%)
- 08:30 AM Durable goods orders, May preliminary (GS +2.4%, consensus +3.0%, last -1.3%); Durable goods orders ex-transportation, May preliminary (GS +0.4%, consensus +0.7%, last +1.0%); Core capital goods orders, May preliminary (GS +0.4%, consensus +0.6%, last +2.2%); Core capital goods shipments, May preliminary (GS +0.6%, consensus +0.8%, last +0.9%): We estimate durable goods orders rose 2.4% in the preliminary May report, reflecting an expected rebound in commercial aircraft and defense orders. We estimate smaller gains in the core categories, including +0.4% in core capital goods orders and +0.6% for core capital goods shipments, reflecting rebounding exports but an elevated pace of orders the prior month.
- 08:30 AM GDP (third), Q1 (GS +6.4%, consensus +6.4%, last +6.4%); Personal consumption, Q1 (GS +11.3%, consensus +11.4%, last +11.3%): We estimate no revision on net in the third vintage of the Q1 GDP report (previously reported at +6.4% qoq saar).
- 08:30 AM Initial jobless claims, week ended June 19 (GS 380k, consensus 380k, last 412k); Continuing jobless claims, week ended June 12 (consensus 3,481k, last 3,518k): We estimate initial jobless claims decreased to 380k in the week ended June 19.
- 09:30 AM Atlanta Fed President Bostic (FOMC voter) and Philadelphia Fed President Harker (FOMC non-voter) speak: Atlanta Fed President Raphael Bostic and Philadelphia Fed President Patrick Harker will take part in a moderated panel discussion hosted by the Official Monetary and Financial Institutions Forum. Audience Q&A is expected.
- 11:00 AM Kansas City Fed manufacturing index, June (consensus +25, last +26)
- 11:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will take part in a virtual moderated discussion hosted by the College of Staten Island. Audience Q&A is expected.
- 01:00 PM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will discuss the economic outlook in a virtual event hosted by the Clayton Chamber of Commerce. Prepared text is expected.
- 01:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will take part in a virtual discussion hosted by the Headliners Club of Austin. Audience Q&A is expected.
Friday, June 25
- 08:30 AM Personal income, May (GS -2.4%, consensus -2.7%, last -13.1%); Personal spending, May (GS +0.6% consensus +0.4%, last +0.5%); PCE price index, May (GS +0.52%, consensus +0.5%, last +0.61%); Core PCE price index, May (GS +0.56%, consensus +0.6%, last +0.66%); PCE price index (yoy), May (GS +3.95%, consensus +3.9%, last +3.58%); Core PCE price index (yoy), May (GS +3.43%, consensus +3.4%, last +3.06%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.56% month-over-month in May, corresponding to a 3.43% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.52% in May, corresponding to a 3.95% increase from a year earlier. We expect a 2.4% decrease in personal income and a 0.6% increase in personal spending in May.
- 10:00 AM University of Michigan consumer sentiment, June final (87.0, consensus 86.5, last 86.4): We expect the University of Michigan consumer sentiment index increased to 87.0 in the final June reading, reflecting stronger signals from other consumer sentiment measures.
- 11:35 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will speak at a conference on economic resilience hosted by the Cleveland Fed.
- 01:00 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will discuss financial stability during a virtual event hosted by the Official Monetary and Financial Institutions Forum. Prepared text and audience Q&A are expected.
- 03:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will deliver honoree remarks at the UCEAP Distinguished Alumni Award Ceremony hosted by the University of California Education Abroad Program.
Source: DB, BofA, Goldman