Key Events In The Holiday-Shortened Busy Week

Despite the July 4th mid-week holiday, the coming week will be packed with major economic updates. Goldman Sachs summarizes what to look for in the next 5 days.

From GS What Matters in FX This Week

As usual, the first week of the month is packed with data that can be divided into three broad buckets:

  • Monetary Policy: The week ahead brings rate decisions by a clutch of central banks. The ECB meeting on Thursday is likely to take centre stage. We and consensus expect a 25bp cut to 0.75%. Further non-standard measures are unlikely, but such initiatives are likely to be taken should a government face outright funding strikes. Also on Thursday, we expect the BoE to ease policy by announcing a further GBP75bn in conventional Gilt purchases. Rates are likely to remain unchanged in Sweden, Australia, Poland, and Malaysia.
  • Business Surveys: Over the weekend, the China PMI fell less than expected to 50.2 from 50.4 (consensus 49.8). The key business surveys for Monday are the UK PMI and the US ISM. We expect the UK PMI to be broadly stable and the US ISM to fall to 51.0 from 53.5. The Eurozone PMIs will likely remain very close to their already released "flash" readings.
  • Activity Data: The key print of the week is the US labour market data on Friday. We expect 75K for non-farm payrolls and the unemployment rate to be unchanged at 8.2%. German and Spanish IP out on Friday should provide important indicators for the health of the Euro Area. German IP is expected to continue to tread water, and we will watch for further declines in the equivalent Spanish series.

The week also has many data releases from Asia. To start, the Korean trade data already showed that exports improved 1.3%, above consensus at 0.5%. As Goohoon Kwon has pointed out, we suspect that the outperformance for the last two months might reflect in part a gradual positive impact of Chinese stimulus. The inflation prints from Korea, Indonesia, Thailand, Taiwan, and the Philippines are likely to show relatively muted price pressures. The two key talking points in relation to Asian price pressures are the rapid reduction in food prices in China, which point to a notable reduction in headline inflation in June, and the poor start to the monsoon in India, which is likely to push up food prices if the rains do not recover closer to their long term average.

Our first port of call when tracking the global business cycle is our GLI, with the final reading due following Monday's manufacturing surveys. The advanced reading showed a sharp reduction in momentum to -0.26%mom from -0.06%, which points to a weakening in global cyclical strength in recent months. Otherwise, we will pay attention to where our current activity indicators are tracking. The US CAI is currently at 1.5%, and the data in the week ahead will provide an update to that reading. This week’s data will also be key for our short S&P trade. As Dominic Wilson pointed out in his latest Global Market Views, until the data picture improves it will be hard to shake off our current caution with respect to the price action.

Monday July 2

  • Bank of Japan Tankan Index (July): Consensus expects -4 for the second quarter large manufacturing DI, unchanged from the print for the first quarter.
  • Euro-area unemployment (May): Consensus expects 11.1% in May, up from 11.0% in April.
  • Global PMI’s/US ISM Manufacturing (June): We expect 51.0 for the ISM, below consensus of 52.0 and down from 53.5 in May.
  • Also Interesting: Asmussen Speech, Turkey GDP, South-Korea, Indonesia and Thailand CPI

Tuesday July 3

  • Australia Central Bank Meeting (July): We expect the base rate to be unchanged at 3.50%, in line with consensus.
  • Brazil IP (May): Consensus expects -3.0%yoy in May, down from -2.9%yoy for April
  • US Factory Orders (June): Consensus expects factory orders to grow at -0.2%mom, up from -0.6%mom in May
  • Also Interesting: China Services PMI, Spanish Unemployment, Turkey CPI

Wednesday July 4

  • Euro-area Retail Sales (June): Consensus expects 0.3%mom in June, up from -1.0%mom in May.
  • Poland Central Bank meeting: We and consensus expect 4.75%, unchanged from June.
  • Swedish Riksbank Meeting: We expect the base rate to be unchanged at 1.50%.
  • Merkel/Monti Meeting

Thursday July 5

  • German Factory Orders: Consensus expects 0.3%mom in May, up from -1.9%mom in April
  • Bank of England Meeting (July): We and consensus expect the base rate to be unchanged at 0.50%, and we expect further quantitative easing of £75bn.
  • ECB Meeting (July): We and consensus anticipate the base rate to be cut from 1.00% to 0.75%.
  • US Non-Manufacturing ISM (June): Consensus expects 52.9, down from 53.7 in May
  • US ADP Employment Change (June): Consensus expects the print to fall to 95K from 133K in May
  • Also Interesting: US Initial Jobless Claims, Malaysia Central Bank Meeting.

Friday July 6

  • German IP (June): Consensus expects 0.5%mom, up from -2.2%mom in May.
  • US Non-Farm Payrolls (June): We expect 75K in June, below consensus of 93K. Non-farm payrolls grew by 69K in May.
  • US Unemployment Rate (June): We expect this to be unchanged at 8.2% for June, in line with consensus.
  • Also Interesting: Switzerland CPI, Norway IP, Brazilian CPI


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