Australia’s Q2 CPI came in softer-than-expected at 6.0% YoY from 7.0% YoY in Q1 and unemployment rate is at record lows of 3.5%. The decision will be a close call even as inflation is cooling, because labor market conditions are still tight. While the consensus expects another 25bps rate hike from Australia’s central bank, market is not pricing in another rate hike. The complexity on Tuesday’s RBA meeting is clear with consensus and market expectations diverging. Reserve Bank of Australia faces a complex setup at this week’s meeting EURUSD broke below 1.10 following the ECB turn last week but closed just above, and focus remains on 100DMA at 1.0907. Germany’s PMIs and Ifo survey has indicated some scope for caution. With ECB turning more data-dependent at the meeting last week, these data points will be key to determine how much more ammunition is left for the ECB to fight inflation. Inflation is expected to moderate and come in at 5.4% YoY for the core from June’s 5.5% YoY. The GDP data is expected to show that the bloc’s economy returned to growth in the second quarter, with consensus expecting 0.2% QoQ growth after the economy stagnated at the start of the year. The Eurozone is to release a preliminary estimate of July inflation and second quarter GDP on Monday that will be closely watched amid debate over whether the European Central Bank (ECB) may raise interest rates again at its next meeting in September. Eurozone GDP and inflation data will be key for ECB and EUR trajectory Medium-term inflation forecasts will also be key as rates are expected to peak below 6% now. The BOE will also publish new forecasts, and investors will be keen to watch whether recession calls return. But risks remain that the central bank could follow through with another 50bps move as price pressures are proving to be persistent and sticky. Bank of England hike will bring rates to 15-year highsīank of England policy decision is due on Thursday and expectations are for another rate hike to bring interest rates to 5.25% from 5% and the possibility of a 50bps move has reduced with inflation on the downward trajectory after June CPI came in softer-than-expected albeit still high at 7.9% YoY. Proxy-China trades could be of interest as well, and investors can refer to our Luxury Goods or Asia tourism equity theme baskets for inspiration. ETFs like KraneShares CSI China Internet ETF (KWEB) and Invesco Golden Dragon China ETF (PGJ) also offer exposure to China stocks. This could bring a further push to the recovery in China and HK markets, after HK50 crossed a key psychological barrier at 20k at the start of the week. China's State Council Information Office has said that Li Chunlin, vice chairman of the National Development and Reform Commission, and officials from the Ministry of Industry and Information Technology, the Ministry of Commerce and the State Administration for Market Regulation will hold a press conference at 3pm Beijing time on Monday. Caixin PMIs, which focus on small and medium-sized enterprises, will now be in focus for the rest of the week.įurther stimulus announcements are also awaited to bolster consumption. Non-manufacturing PMI slowed to 51.5 in July from 53.2 previously. China PMIs and stimulus announcements could keep China and China-proxy trades in favorĬhina’s official PMIs were reported on Monday morning, and manufacturing PMI strengthened slightly to 49.3 in July from 49 in June, still remaining in contraction as stimulus measures have remained targeted and slow. For a better understanding of US non-farm payrolls, read this primer. Still, a lot more data is due before the September Fed meeting and market may not read too much into this month’s report. Bloomberg consensus expects headline NFP change to remain near 200k after gains of 209k in June and unemployment rate could remain steady as well while average weekly earnings is expected to slow to 0.3% MoM/4.2% YoY from 0.4% MoM/4.4% YoY previously. However, if tight labor conditions persist, it will remain hard to see an end of the inflation problem and the Fed tightening cycle. Labor market could be one of those, and a sharp rise in unemployment rate could trigger more calls for a recession and an eventual turn in the Fed policy. This is giving room for markets to rally until something breaks as the effects of Fed tightening pass through. Goldilocks continues with disinflation trends being a key focus for the markets while economic growth is holding up well too. US labor market data will be particularly important this week after last week’s Fed meeting that has signalled a data-dependent approach. US NFP jobs data on watch to get clarity on how soon the cycle can turn
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