On the Macro
It’s another busy week ahead on the economic calendar, with the US Jobs Report and private sector PMI numbers in focus.
For the Dollar:
It is a busy but shortened week ahead on the US economic calendar.
ISM manufacturing PMI and sub-component numbers kickstart the week. While a more marked contraction would be bearish, investors will likely remain focused on the labor market, inflation, and new order sub-components.
On Thursday, the focus will shift to labor market numbers and the services sector. The all-important ISM Non-Manufacturing PMI and sub-components will garner plenty of interest. Slower service sector activity, softer input and output cost pressures, and weaker new orders could reignite fears of a Fed-fueled economic recession.
However, JOLT’s job openings and jobless claims will also need consideration.
On Friday, the US Jobs Report will be the main report of the week. After the inflation numbers last Friday, a solid US Jobs Report would cement a July rate hike and raise the bets on a September move.
Last week, Fed Chair Powell warned the markets of consecutive rate hikes sitting on the table ahead of the inflation figures.
With inflation and the Jobs Report as the focal points, the FOMC meeting minutes will unlikely move the dial on Wednesday. Since the FOMC Press Conference, Fed Chair Powell delivered two days of testimony on Capitol Hill and two speeches at the ECB Central Bank Forum. Powell stuck to the script, dashing hopes of a post-July pause.
However, investors should monitor Fed chatter throughout the week.
For the EUR:
It’s a busy week for the EUR.
Private sector PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone will be in focus on Monday and Wednesday.
Barring revisions to the French and German PMIs, Italy and the Eurozone PMIs will likely garner more interest. A deeper contraction across the manufacturing sector and slower service sector activity could test the ECB’s commitment to bring inflation to target.
Beyond the headline PMIs, investors should consider the inflation, new orders, and employment sub-components.
While the PMIs will influence, economic indicators from Germany will move the dial. Trade (Tues), factory orders (Thurs), and industrial production (Fri) numbers will give investors a snapshot of the German economy midway through Q2.
Beyond the stats, investors should also consider ECB commentary. Dovish sentiment toward the July move or hawkish references to a September move would influence.
For the Pound:
It is another quiet week ahead for the Pound. Finalized manufacturing and services sector PMIs will draw interest on Monday and Wednesday. We expect revisions to the services PMI and the sub-components to impact the GBP to USD.
Other stats include construction PMI, house price data, and labor productivity numbers. We expect these to have a limited impact on sentiment toward BoE monetary policy.
However, investors should also monitor Bank of England commentary throughout the week. MPC Member Catherine Mann (Fri) is on the calendar to speak this week.
For the Loonie:
It is a quiet week ahead on the economic calendar for the Loonie. However, trade data and employment numbers will move the dial on Thursday and Friday.
Central banks remain committed to taming inflation. Resilient economies have allowed central banks to lift interest rates at an aggressive pace. Strong trade and employment numbers could give the BoC the option to deliver more.
However, sentiment toward crude oil demand and prices will also influence.
Out of Asia
For the Aussie Dollar:
It is a busy week for the Aussie Dollar. Finalized retail sales and trade data will provide direction on Wednesday and Thursday. We expect the trade data to have more impact as investors assess the influence of lackluster economic activity in China on the Australian economy.
While the stats will influence, the RBA monetary policy decision will be the main event for the Aussie. Economists expect the RBA to stand pat next week, with cooler-than-expected inflation numbers shutting the door on the RBA hawks. A hold on interest rates would leave the Rate Statement in focus. The markets will expect a dovish hold.
For the Kiwi Dollar:
It’s a quiet week for the Kiwi Dollar. Building consents and Q2 business confidence numbers will be in focus early in the week.
While building consents will draw interest on Monday, Q2 NZIER Business Confidence numbers should have more influence. A pickup in business confidence would support labor market conditions and business investment.
For the Japanese Yen:
It is another busy week for the Japanese Yen. On Monday, Tankan Survey-based numbers for Q2 will draw interest ahead of service PMI numbers on Wednesday.
We expect both reports to move the dial ahead of household spending figures on Friday. Strong household spending would give the BoJ hawks more reason to push for a monetary policy tweak.
Out of China
It is another quiet week ahead. However, the all-important CAIXIN survey-based PMIs will move the dial on Monday and Wednesday.
A contraction across the manufacturing sector and weaker service sector activity would weigh on riskier assets but reignite hopes of a Beijing stimulus package.