The Week Ahead: The Fed, the ECB, and the Bank of Japan

On the Macro

It’s a busy week ahead on the economic calendar. While prelim private sector PMIs and inflation will draw plenty of interest, the Fed, the ECB, and the Bank of Japan will deliver monetary policy decisions that could yield surprises.

For the Dollar:

Prelim private sector PMI numbers for July will kickstart the week on Monday. We expect the services PMI to have more impact, with the prices, new orders, and employment sub-components needing consideration.

On Tuesday, consumer confidence figures for July will also influence ahead of the FOMC interest rate decision on Wednesday. The markets are betting on a final 25-basis point interest rate hike to end the monetary policy tightening cycle. Any deviation from expectations will move the markets.

A 25-basis point hike will shift the market focus to the Fed Chair Powell press conference.

On Thursday, core durable goods orders and jobless claims will need consideration before a busy Friday session.

Personal spending and Core PCE Price Index numbers will wrap up a busy week. An unexpected pickup in inflationary pressure could test the market bets on the Fed hitting the brakes.

For the EUR:

It’s a busy week for the EUR, with prelim private sector PMIs for France, Germany, and the Eurozone kickstarting the week.

With recessionary fears lingering, slower service sector growth and a more marked contraction across the manufacturing sector would test buyer appetite.

The German economy will be in focus on Tuesday and Thursday, with business and consumer sentiment numbers likely to influence.

However, the ECB monetary policy decision and ECB President Christine Lagarde press conference will be the euro area event of the week. While the markets expect a 25-basis point interest rate hike on Thursday, the ECB has remained silent on its post-summer plans. Forward guidance on inflation, the economy, and monetary policy will move the dial.

On Friday, prelim inflation numbers for July will wrap up a busy week. Inflation numbers from France and Germany will need consideration.

For the Pound:

It is a quieter week ahead for the Pound. Prelim private sector PMIs for July will draw interest on Monday. We expect the services PMI to have more influence, with investors needing to consider the sub-components, including prices, employment, and new orders.

On Tuesday, CBI Industrial Trend Orders should have a limited impact on the Pound.

With the economic calendar on the light side, investors should track BoE chatter throughout the week. However, no Monetary Policy Committee Members are on the calendar to speak, leaving commentary with the media to move the dial.

For the Loonie:

It is a quiet week ahead on the economic calendar for the Loonie. Monthly GDP numbers will move the dial on Friday. After disappointing retail sales figures from last week, a weak set of numbers could force the BoC into a holding pattern.

Other stats include manufacturing and wholesale sales figures that should have a limited impact on the Loonie.

Out of Asia

For the Aussie Dollar:

It is a relatively busy week for the Aussie Dollar. Q2 CPI and PPI numbers will move the dial on Wednesday and Friday. After the hotter-than-expected employment numbers, sticky inflation could see the markets pencil in a 25-basis point RBA rate hike.

On Friday, retail sales figures for June will also need consideration. The RBA is looking for capacity constraints to ease across the labor market and a pullback in consumption to ease inflationary pressures.

For the Kiwi Dollar:

It’s a quiet week for the Kiwi Dollar. There are no economic indicators to consider, leaving the Kiwi in the hands of market risk sentiment. However, we expect inflation numbers from Australia to influence by proxy.

For the Japanese Yen:

It is another busy week for the Japanese Yen. Prelim private sector PMIs for July will need consideration on Monday. We expect the services PMI to have more influence, with the markets looking for reasons for the BoJ to tweak its monetary policy stance.

After a quiet Tuesday to Thursday, Tokyo inflation numbers for July will move the dial on Friday before the Bank of Japan monetary policy decision.

Economists forecast the Tokyo core annual inflation rate to soften from 3.2% to 2.9%. Hotter-than-expected numbers would fuel bets on a BoJ tweak to the Yield Curve Control policy.

With the markets expecting the Bank of Japan to hold interest rates at -0.10%, the monetary policy statement, outlook report, and press conference will move the dial.

Out of China

It is a quiet week ahead. There are no economic indicators for investors to consider. The lack of economic indicators will leave chatter from Beijing to draw interest.