With the US markets closed today, market events this week will be dominated by G10 central bank meetings, among which the ECB stands out, but also notable will be the RBA, BoC and Riksbank. Consensus does not expect policy changes yet. There is also a busy calendar for the UK (PMIs, housing, IP and trade balance) along with GDP/IP releases elsewhere. In EMs, there will be monetary policy meetings in Brazil, Poland and Malaysia. Brazil BCB is expected to cut rates by 100bp.
Central bank preview:
- The ECB remains trapped between a strong(er) EUR and a rapidly shrinking universe of monetizable bonds; as a result Draghi will emphasize the impact of a strong EUR on inflation dynamics but will refrain from disclosing the destiny of QE after the 2018 expiry. Given the recent EUR appreciation, the ECB will prefer waiting for the September FOMC before committing on QE. Most sellside desks call for the October meeting where BofA expects a 6m QE extension at €40bn/month.
- The RBA is also expected to remain on hold with communication potentially getting more interesting now that forecasts and Parliamentary testimony are out of the way. On the longer term, the domestic housing market in particular to have a more significant influence on monetary policy with the balance of risks favoring rates up.
- For the BoC, unexpectedly strong economic growth, below neutral o/n rates and the Fed on a hiking cycle means that the Canada should follow with a hiking cycle as well. This said, low inflation and inflation expectations along with CAD appreciation do not argue for urgency. As a result while some have said the BOC’s meeting is “live”, most expected the central bank to remain on hold in September and hikes +25bp in October.
In other data:
- In the US, we get durable & capital goods orders (F), trade balance, ISM non-mfg and multiple Fed speakers in the agenda.
- In the Eurozone, beyond the ECB, we have retail sales, industrial production and GDP.
- In the UK, we have PMIs, industrial production, construction output, and trade balance.
- In Japan, we have monetary base, PMIs, trade balance and final print of Q2 GDP.
- In Canada, beyond central bank rates decision, we also have labor market report.
- In Australia, focus is on RBA’s rates meeting, while other economic releases include trade balance, retail sales, GDP, home loans and investment lending.
Below is a breakdown of key events by day, courtesy of Deutsche Bank:
- It’s a quiet start to the week today with Eurozone PPI and the Sentix investor confidence reading the only data of note. With the US closed there is no data scheduled across the pond.
- Onto Tuesday, Japan and China’s (Caixin) service and composite PMIs are due early in the morning. Then we have UK and Italy’s service and composite PMI for August. There is also the final readings for service and composite PMIs for the Eurozone, Germany and France. Elsewhere, the Eurozone’s retail sales and final readings for 2Q GDP are due. In the US, there is factory orders for July and final readings for durable goods and capital goods orders.
- Turning to Wednesday, Germany’s factory orders for July is the only data due out. Over in the US, the ISM non-manufacturing PMI, the Fed’s Beige book, trade balance and final Markit services and composite PMI are also due.
- For Thursday, Germany’s industrial production for July are due along with France’s trade balance and current account balance stats. Elsewhere, house price data in the UK and Q2 GDP (final revision) for the Eurozone is due. This is all before the ECB meeting around midday. Over in the US, there is initial jobless claims, continuing claims and final readings for Q2 nonfarm productivity due.
- Finally, on Friday, Japan’s trade balance and current account balance along with final readings for 2Q GDP will be due in early morning. China will also release its August import / export stats. In Europe, Germany’s trade balance, current account balance and export / imports stats are due. In the UK and France, industrial production, manufacturing production and trade balance stats are also due. Over in the US, there is the final reading for wholesale inventories along with consumer credit data.
