One of the core tenets of monetary policy is price stability. And the run-away inflationary pressures over the past year have certainly put central bank credibility to the test. Elevated price pressures have policymakers working overtime, trying to normalize policy settings, while also being mindful of growth. Most core central banks are already on their way, having effected rate hikes by varying degrees to rein in record inflation and give credibility to their price targets. The FED, the SNB, the BOE and the BOJ are in the spotlight this week.
Have a look at the most important events of the coming days in our usual weekly publication.
Monday – 13 June 2022
Gross Domestic Product, Industrial & Manufacturing Production and Trade balance (GBP, GMT 06:00) – A plethora of data from the UK should show a continued stuttering recession. UK GDP growth expected to eased to 0.2% in April the drop to -0.1% m/m seen last month. Regardless of the slight growth, the downside risks to the growth outlook remain. Clearly Q2 is going to be weaker than initially expected and the BoE already warned of recession risks for next year. Manufacturing Production for April is expected at 0.3% from -0.2% last month.
Tuesday – 14 June 2022
Average Earnings (GBP, GMT 06:00) – Average Earnings including bonus for April should set at 5.4% (3Mo/Yr) from 7%, while excluding bonus should be at 4.1% (3Mo/Yr). The ILO unemployment rate is seen unchanged at 3.8% in April from 3.7%.
German HICP & ZEW (EUR, GMT 06:00 & 09:00) – The hot topic for the Eurozone’s biggest and most important economy. Data is expected to show y/y at 7.8% from 8.7%, while June’s ZEW is seen contracting at -42 from -34.3.
Producer Price Index and Core (USD, GMT 12:30) –The May PPI gains are seen at 0.7% for the headline and 0.6% for the core, following respective gains of 0.5% and 0.4% in March. As expected readings would result in the y/y headline PPI metric easing to 10.8% from 11.0%, versus an all-time high of 11.5% in March. We expect the y/y core measure to dip to 8.6% from 8.8%, versus an all-time high 9.2% in March. Overall, the massive PPI climb since the start of 2021 exceeded the uptrend in headline and core CPI data, and both sets of gains have chased outsized increases in the trade price measures.
Wednesday – 15 June 2022
Retail Sales (CNY, GMT 02:00) – Retail Sales for China are expected to plunge to -6.9% in May from -11.1%.
Retail Sales (USD, GMT 12:30) – May’s Retail sales are anticipated at 0.2% for the headline and 1.0% for the ex-auto measure, after respective April increases of 0.9% and 0.6%. Strength in core prices will lift nominal sales, and we expect a 4% increase for the CPI gasoline index that will lift gasoline sales. Unit vehicle sales fell to just 12.7 mln in May from 14.5 mln in April as the sector faces ongoing headwinds from semiconductor shortages
ECB President Lagarde Speech (EUR, GMT 16:00)
Interest Rate Decision, Monetary Policy Statement and Press Conference (USD, GMT 19:00-19:30) – The Fed funds futuresare pricing in at least 50 bps in rate hikes over the next several policy meeting, with the implied October contract at 1.995% and December at 2.78%, with January 2023 at 2.90%. Half point hikes next week and in July are done deals. And while we look for the FOMC to back off the brakes in September as monthly inflation rates a projected softening along with the economy, many economists doubt inflation has peaked. We expect to get important insights from the FOMC and other central banks at the August Jackson Hole conference.
Gross Domestic Product (NZD, GMT 22:45) – GDP for Q1 is expected higher at 3.2% q/q and 3.3% y/y.
Thursday – 16 June 2022
Eurogroup Meeting
Employment (AUD, GMT 01:30) – The employment change is expected to grow by just 25k (a nearly 21k increase from last month’s).
SNB Rate Statement & Interest Rate Decision (CHF, GMT 07:30) – The central bank is still in wait and see mode while watching the impact of the war in Ukraine and the resulting spike in energy prices. The central bank so far doesn’t expect a dramatic deterioration in growth, but clearly is weary and with the currency underpinned by safe haven demands remains reluctant to signal an end to the negative interest rate policy.
Interest Rate Decision, Monetary Policy Statement and Press Conference (GBP, GMT 11:00) – The BoE remains on course for further rate hikes. Yet, growth risks are also becoming ever more evident, and political turmoil is complicating the picture even if PM Johnson managed to survive a confidence vote yesterday. BoE’s chief economist recently said he personally thinks “there is more that needs to be done in this transition from what has been a very supportive monetary policy for the economy really going back to the financial crisis, through the fallout from Brexit and the pandemic”.
Friday – 17 June 2022
BOJ Rate Statement & Interest Rate Decision (JPY, GMT 03:00) – The dovish BoJ stance was affirmed this week as Governor Kuroda emphasized the need for accommodative policy, while noting a weaker yen is not desirable, though we note it is hard to have one without the other. Kuroda added FX is the purview of the MOF and the government. The BoJ is seeking 2% inflation, while the bank will be working closely with the government. For now there is nothing to suggest that the BoJ will be ditching its very accommodative policy stance and join the global rate hike move
Consumer Price Index (EUR, GMT 09:00) – Eurozone’s inflation forecasts have been revised sharply higher and HICP is now expected to average 6.8% this year, followed by 3.5% in 2023 and 2.1% in 2024. These mark clear upward revisions, and with the 2024 forecast a tad above the ECB’s target. Core inflation is expected to be even higher, at 2.3% in 2024.
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Andria Pichidi
Market Analyst
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