by Darius Anucauskas

Weekly Outlook: Aug 19 - Aug 23: Meeting Minutes From RBA, FOMC and ECB, Preliminary PMIs

The main events for this week will be the release of the meeting minutes from the RBA, the FOMC and the ECB. Everyone will be on the lookout for any hints on their further monetary policy steps. The eurozone will produce its final inflation numbers for July. Thursday will be a preliminary PMI day for Australia, Japan, France, Germany and for the eurozone as a whole.

Monday will be somewhat of a quiet day in terms of economic data releases. The only meaningful numbers could be the eurozone CPIs for the month of July. The core MoM and YoY inflation figures are expected to have remained the same as initial estimate, at -0.6% and +0.9% respectively. The headline MoM number is forecasted to come out at -0.4%, which is well below the previous +0.2%. But the headline YoY number is expected to remain the same, at +1.1%. Although the forecast is the same as the previous figure, still, it is well below the ECB inflation target, which is currently at +2.0% over the medium term.

On Tuesday, during the Asian morning, we will get the Monetary Policy Meeting Minutes from the Reserve Bank of Australia. At that meeting, Australian policymakers kept interest rates unchanged at +1.00% and noted that they will continue to monitor developments in the labor market closely, and ease policy further if needed to support sustainable growth and achieve their inflation target. It is believed to be another 25 bps cut, bringing the rate from +1.00% to +0.75%. Last time the bank cut its rates in the beginning of July and it was the second cut this year. Although the Bank is quite happy with the domestic economy, the China-US trade disputes are weighing in the global economy, a slide in which could have a domino effect on Australia as well.

During the European morning Norway will deliver its QoQ GDP number for Q2. Currently, there is no forecast for that number, but we know that the previous reding, which was released in May, fell slightly below zero, to -0.1%. It was the first time since February 2018, when the reading fell again below zero.

Wednesday’s economic calendar will be a slightly more eventful day than Tuesday’s. Initially, during the early European hours, Norway will show us if its unemployment stayed the same, at 3.4%, as it is currently expected. After that, Europe will remain quiet in terms of economic data.

It will be Canada’s turn to provide us with its inflation numbers for the month of July. At the time of writing this report, there are no forecasts for the core MoM and YoY CPIs. The previous MoM and the YoY numbers were at +0.0% and +2.0% respectively. The headline MoM and YoY numbers are expected to show up slightly mixed. The MoM is believed to come out +0.1%, which is better than the previous -0.2%, whereas the YoY figure is forecasted to appear at +1.7%, which is below the previous reading of +2.0%. The core YoY number is in line with the Bank of Canada inflation target, at +2.0%, but the headline one still needs to pick up the pace, in order to get closer to the target. If the numbers come out as expected, or even a bit worse, this could have a slight negative effect on the Canadian dollar, especially against the US dollar.

Later on, after the US opening bell, we will get the existing home sales figures from the US. Those are expected to have increased and the current forecast is at +2.5%, whereas the previous was at -1.7%.

We also get the FOMC meeting minutes. The market will be hoping to see any hints or clarifications on the Fed’s further monetary policy moves. As we know, during the July meeting, the Fed cut their interest rates by 25bps points. According to the CME’s FedWatch Tool, the current probability of 25 bps during the September meeting sits at 83%, with a 17% probability of 50 bps during the same meeting. After the September meeting, the markets expect at least one more cut by the end of this year, something that would make president Trump quite happy. Investors could get more clarity on the Fed's future course of action, when Jerome Powell speaks during the Jackson Hole Symposium on Friday.

On Thursday, it will be a day of preliminary PMIs, as several countries will be releasing their readings for the month of July. There is currently no forecast for the Australian and Japanese numbers, unlike for the French, German and the eurozone ones, which are expected to have dropped slightly. The French preliminary manufacturing and services PMIs are believed to have gone down from 49.7 to 49.5 and from 50.6 to 50.5, respectively. The same data from Germany is expected to have fallen slightly as well, going from 43.2 to 43.1 in manufacturing and from 54.5 to 54.1 in services. The eurozone, as a whole, is believed to show that their preliminary manufacturing PMI has slid to 46.3 from 46.5 and services have gone to 53.0 from 53.2.

US will also provide us with their preliminary manufacturing and services PMI figures, where the first set is expected to have increased by a tenth from 50.4 to 50.5, but the second set (services) is forecasted to decline by a tenth, going from 53.0 to 52.9.

In between the European and the US PMIs, the ECB will publish their monetary policy meeting minutes. During the last meeting in July, the ECB kept its interest rates on hold. According to the statement, the Governing Council doesn’t have any intention to raise its key rates and keep them the same or lower at least up until the first half of 2020. At its latest gathering, the ECB officially opened the door to lower rates and added that additional measures, such as a potential QE restart, may also be introduced.

Finally, on Friday, during the early hours of the Asian morning, New Zealand will release their retail sales figures on a QoQ basis for Q2. The core figure is expected to come out well below the previous +0.7%, at +0.2%. The headline number is forecasted to come out at +0.1%, which is well below the previous +0.7%. The RBNZ will keep a close eye on that number as well, as the Bank continues to cut its rates in order to stimulate its economy. If the figures come out slightly better than expected, NZD might initially attract some buyers. But if those figures are still worse than the previous, the NZD-buying could eventually be short-lived.

Japan will provide us its inflation numbers for the month of July. The core YoY figure is expected to have remained the same, at +0.6%. But the headline YoY one is forecasted to have grown by a tenth of a percent, going from +0.7% to +0.8%. For the BoJ and its price stability target, which is at +2.0%, the current inflation numbers are somewhat of a headache. Last time the headline CPI was above 2%, was back in the beginning of 2015.

Canada will also be the one that produces their retail sales numbers for the general public. Currently, the expectation for the core figure on a MoM basis for the month of June is to show up at -0.1%, which is slightly higher than the previous -0.3%. With the headline MoM retail sales number everything is absolutely the opposite, as the previous reading is sat at -0.1% and the forecast is for a -0.3%. If the outcome for both of these is better than expected, then we may see the Canadian dollar strengthening.

Also, in terms of other economic data, the US will show us how their new home sales performed in July. So far, the expectation for that is that the number had dropped significantly, going from the previous +7.0% in June to -0.2% in July. We doubt that the US dollar would somehow strongly react to the figure.


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