The Week Ahead: Central Banks, Germany, and US Inflation in Focus

On the Macro

It’s another busy week ahead on the economic calendar, with several market-moving stats that could make for an interesting summer.

The Week Ahead For the Dollar:

It is a busy week ahead on the US economic calendar.

Consumer confidence and core durable goods orders kick-start the week on Tuesday. With elevated inflation and a hawkish Fed, a slide in consumer confidence to sub-100 would weigh on riskier assets.

On Thursday, the focus will shift to the weekly jobless claims and finalized Q1 GDP numbers. The jobless claims should have more influence, barring any revisions to the GDP numbers.

However, the Core PCE Price Index and personal spending/income numbers will likely have the most impact. Better-than-expected personal spending/income figures and sticky inflation would support Fed Chair Powell’s two-rate hike outlook.

Other stats include housing sector numbers and finalized Michigan Consumer Sentiment figures that should have a limited impact on the dollar.

Fed chatter will need consideration, with Fed Chair Powell speaking on Wednesday.

For the EUR:

It’s a relatively quiet week for the EUR.

On Monday, German Ifo Business Climate Index will move the dial ahead of German GfK consumer climate numbers on Tuesday. The German economic recession and concerns over the global macroeconomic environment could see the Business Climate Index and sub-components take a tumble.

However, tight labor market conditions should limit the downside of the Consumer Climate Index.

On Thursday and Friday, the German economy remains in the spotlight. Prelim inflation numbers for June and retail sales figures for May will be in focus on Thursday ahead of unemployment figures on Friday. We expect inflation to be the key driver, with prelim euro area inflation figures also significant on Friday.

Beyond the stats, investors should also consider ECB commentary. ECB President Lagarde (Mon/Tues/Wed), Chief Economist Philip Lane (Wed), and Executive Board members Luis de Guindos (Wed), Fabio Panetta (Tues), Frank Elderson (Tues), Andrea Enria (Wed), Isabel Schnabel (Tues), and Elizabeth McCaul (Mon) are on the calendar to speak.

The ECB will also release the monthly Economic Bulletin on Thursday.

The Week Ahead For the Pound:

It is a quiet week ahead for the Pound. After the surprise Bank of England interest rate hike, the UK economy will be in focus on Friday. Q1 GDP numbers will garner plenty of interest.

However, investors should also monitor Bank of England commentary throughout the week. Bank of England Governor Andrew Bailey (Wed) and Chief Economist Huw Pill (Wed) are on the calendar to speak. MPC Members Swati Dhingra (Tues) and Silvana Tenreyro (Tues/Thurs) will also deliver speeches.

We expect market sensitivity to comments relating to inflation, the UK economic outlook, and monetary policy.

For the Loonie:

It is a quiet week ahead on the economic calendar for the Loonie. However, inflation numbers for May and GDP figures for April will influence the Loonie on Thursday and Friday.

Following surprise monetary policy moves by a number of central banks, the BoC Business Outlook Survey will move the dial on Friday.

Beyond the economic calendar, market sentiment toward the global economic outlook also needs consideration.

Out of Asia

The Week Ahead For the Aussie Dollar:

It is another quiet week for the Aussie Dollar. On Wednesday, the all-important CPI Report and retail sales numbers on Thursday will influence. A pickup in inflation and an increase in retail sales could force the RBA into further policy moves.

On Friday, private sector credit figures for May will likely have a limited impact on the Aussie.

For the Kiwi Dollar:

It’s also a quiet week for the Kiwi Dollar. The ANZ Business Confidence Report will draw interest on Thursday. After hawkish RBNZ interest rate hikes, a pickup in business confidence would support a Kiwi breakout.

However, recessionary fears would need to ease to support a bullish week.

For the Japanese Yen:

It is another busy week for the Japanese Yen. On Thursday, retail sales will be in focus ahead of the all-important Tokyo core inflation numbers on Friday.

Hotter-than-expected core inflation numbers would fuel bets on a Bank of Japan monetary policy tweak. On Friday, industrial production figures for May will also need consideration.

Out of China

It is a quiet week ahead, but a likely influential one, with NBS private sector PMIs out on Friday. A deeper contraction across the manufacturing sector would spook the markets but could fuel further speculation of a Beijing stimulus package.