In the week ahead, we get the usual middle-of-the-month batch of early business surveys, including the New York Empire, Philly Fed and Eurozone Flash PMIs. The second key focus will be a number of important monetary policy meetings, including the FOMC, as well as the Swiss, Norwegian Turkish and Indian policy decisions. The latter two are particularly interesting in the light of the recent EM weakness. The main event this weak will be the FOMC meeting after the recent market focus on the timing of tapering of the QE3 program. Swings in bond markets related to the FOMC meeting could be the primary source of FX volatility this week.
Goldman expects the FOMC statement to show only modest changes, mostly focused on acknowledging the lower inflation numbers. Moreover, the committee is likely to downgrade its 2013 growth and inflation numbers moderately. While Chairman Bernanke is likely to reiterate in the post-statement press conference that the QE tapering decision is data dependent, he is largely expected to dissuade markets from frontloading too much of the entire monetary tightening process—not just the end of QE but also the normalization of the funds rate—as soon as the committee takes the first step in that direction.
Finally, still linked to monetary policy, BOJ Governor Kuroda will give a speech, which FX markets will scrutinize for any hint of additional easing to alleviate the unwinding pressures on $/JPY.
Monday, 17 June
- US Empire MI Index (Jun): previous -1.4, consensus 0
- US Homebuilders Survey (Jun): consensus 45, last 44
- Eurozone Trade balance (Apr): previous EUR 18.7bn
- UK Rightmove house prices: previous 2.1% yoy
- Russia GDP: consensus +1.6% yoy
- India MPC
- Turkey unemployment (Mar): previous +10.5%
- Also interesting: Poland Current Account (Apr), Czech Republic Current Account (Apr), Singapore Exports, Canada International Securities Transactions, Italy Trade Balance, Canada home sales
Tuesday, 18 June
- US CPI: GS -0.1%, consensus +0.2%, last -0.4% (+0.1% ex-food and energy)
- US Housing Starts (May): GS 15%, consensus 11.4%, last -16.5%
- Japan IP (Apr): previous -2.3%yoy
- UK CPI (May): previous +2.0% yoy
- Turkey MPC: consensus unchanged
- Also interesting: Russia IP, South Africa nonfarm payrolls
Wednesday, 19 June
- US FOMC meeting rate decision: It would be risky to deliver a hawkish monetary policy message at a time when growth remains sluggish, inflation continues to trend down, and market inflation expectations are dropping sharply. Goldman does not expect the committee to deviate much from the existing message and keep all options open, and believes that Fed officials will, on the margin, try to calm markets. Moreover, the committee is likely to downgrade its 2013 growth and inflation numbers moderately. While Chairman Bernanke is likely to reiterate in the post-statement press conference that the QE tapering decision is data dependent, Goldman expects him to dissuade markets from frontloading too much of the entire monetary tightening process—not just the end of QE but also the normalization of the funds rate—as soon as the committee takes the first step in that direction.
- Japan Trade Balance (May)
- South Africa CPI (May): consensus +5.9%yoy coinciding with previous yoy data point
- South Africa GDP (Q1 revised): previous +1.9%
- South Africa Current Account (Q1): consensus -6.9% of GDP sa while previous -6.5% of GDP
- UK MPC minutes
- Euro Area construction stats (Apr): -1.7%mom and -7.9%yoy
- Also interesting: Malaysia CPI
Thursday, 20 June
- US initial jobless claims: consensus 340K while previous was 334K
- US leading indicators (May): previous +0.6%
- Euro area flash consumer confidence: previous -21.9
- Euro area flash PMIs
- Switzerland MPC
- Switzerland Trade Balance (May): previous CHF 1.73bn
- Norway MPC (June): previous 1.50%
- Also interesting: Brazil unemployment, Colombia GDP
Friday, 21 June
- BOJ Governor Kuroda speech
- Brazil FDI inflows: forecast US $4bn yoy while previous was -US $5.7bn yoy
- Canada CPI (May): previous +0.4%yoy
- US Phily Fed survey (Jun): GS -3, consensus -2.0, last -5.2. Recent weakness in the manufacturing data, including the decline in the May ISM manufacturing index and slow growth in manufacturing industrial production, are likely to persist in early June.
- US existing home sales (May): GS 1%, consensus 0.6%, last 0.6%
- Also interesting: Russia Gross International Reserves, Colombia IP
The above in Tabular format from Socgen
And the Top Issues for the week ahead alsofrom SocGen
HOPING FOR MORE TAPER-TRANSPARENCY
Recent economic data suggest little cause for the Fed to draw any significant new conclusions on the real economy at the 18/19 June FOMC. Several Fed officials (including Bernanke and Dudley) have already signalled that tapering could begin around September/October if the economy continues to resist fiscal constraint. Our hope for this FOMC meeting is not for any change in policy and nor as some observers argue for a downplaying of tapering risk, but rather some insight on the tapering criteria and how it will be conducted. The FOMC statement and economic projections will not answer these questions; Chairman Bernanke’s press conference would be the possible venue. On the data front, housing data dominate the week and we look for firm readings, which will help build confidence on sustainable recovery.
MARKET ISSUES: The taper debate remains centre stage with ramifications for financial markets well beyond US borders. Greater transparency would be helpful, but we do not expect Bernanke to play down his comments on the possibility of taper at the next few meetings.
EUROPEAN COUNCIL COUNTDOWN
The Eurogroup/ECOFIN meet on 20-21 June ahead of the 27-28 June European Council. The main topics on the Council agenda include (1) the conclusion of the European Semester, (2) an evaluation of efforts to boost employment and growth, and (3) progress on banking union. The Commission is, moreover, due to present the new solidarity measure, which allows countries signing up to a strict diet of structural reforms to win some offsetting economic support. Latvia’s euro application will also be discussed.
MARKET ISSUES: Too-little-too-late remains the common fault line of many of the European growth initiatives. Moreover, for all the talk of less austerity, the targets set out in the national stability programs, due to be validated at the June Council, suggest that fiscal consolidation remains the priority. PMI data this week should see some further improvement but are still very consistent with our scenario of a very gradual improvement only.
G8 ON TRADE
Hope is that the G8 will deliver a trade and tax deal, but at best, we expect a declaration of good intentions. Friday saw some good news as a compromise was reached to exclude cultural industries thus allowing the Council to approve the launch of trade and investment negotiations with the US (on Monday).
MARKET ISSUES: Consensus expectations are low and we would be surprised to see much tangible action. A successful conclusion with the US-EU trade talks could according to EU Commission estimates boost the region’s GDP by 0.27-0.48%. These talks, however, are likely to run many months and successful conclusion is far from guaranteed.
KING’S SWAN SONG
Wednesday will see the release of the 5-6June MPC meeting minutes. On the same day, Mervyn King is due to speak at Mansion House.
MARKET ISSUES: Focus now is on Mark Carney’s arrival – hopes have been spun high, and the risk is disappointment
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Source: Goldman and SocGen