Weekly Market Recap (17-21 July)

<p>Monday:</p><p>New Zealand
Services PMI came at 50.1 vs. 53.3 prior. </p><p>The PBoC left the
MLF rate unchanged at 2.65% as expected. </p><p>ECB’s Vasle (hawk
– non voter) said that core inflation remains high and resilient. As a reminder
the July rate hike is a done deal, so the debate is on the September meeting. </p><p>Tuesday:</p><p>The RBA released
its meeting minutes where we can deduce that the RBA is prepared to hike again
at the August meeting in case the data suggests so:</p><ul type="disc"><li>Board considered
holding rates steady or hiking by 25 bps.</li><li>Strong case for
both, but board judged arguments for holding steady were stronger.</li><li>Board agreed some
further tightening may be required, would reconsider at August meeting.</li><li>Current stance of
monetary policy was "clearly restrictive", and would become more
so.</li><li>Board discussed
risks economy, consumption could slow more than expected.</li><li>Noted squeeze on
household finances, risk unemployment could rise more than needed.</li><li>Board noted inverted
yield curve pointed to tighter conditions, slowing growth.</li><li>Also risks with waiting
too long for inflation to return to target.</li><li>Inflation proving
sticky in other countries, Australian rates still lower than many others.</li><li>Labour market very
tight, weak productivity adding to labour costs.</li><li>While domestic
inflation had eased, service inflation still high along with rents,
energy, food.</li><li>Annual wage growth
seen rising to 4% in q3, following fair work award.</li><li>Economy had slowed
considerably, q2 GDP growth seen around +0.2% q/q.</li><li>Consumer spending
seen weak in q2, rebound in housing market to support consumption.</li></ul><p>ECB’s Knot (hawk –
voter) said that rate hikes beyond July are possible but not certain as it
looks like core inflation has plateaued. He’s optimistic to see inflation
reaching the 2% target in 2024 but added that there’s still lots of data due
between now and September. </p><p>The US Retail
Sales came at 0.2% vs. 0.5% expected and 0.5% prior (revised from 0.3%). The
Control Group printed at 0.6% vs. -0.3% expected and 0.3% prior (revised from
0.2%). On a YoY basis Retail Sales increased at 1.5% vs. 2.0% prior (revised
from 1.2%).</p><p>The Canadian CPI
Y/Y came at 2.8% vs. 3.0% expected and 3.4% prior, while the M/M reading
printed at 0.1% vs. 0.3% expected and 0.4% prior. The Core CPI Y/Y came at 3.2%
vs. 3.5% expected and 3.7% prior, while the M/M figure was -0.1% vs. 0.5%
expected and 0.4% prior. These are all good readings except for the underlying
inflation measures which the BoC is more focused on right now. In fact, the
Common CPI Y/Y printed at 5.1% vs. 5.0% expected and 5.2% prior; the Median CPI
Y/Y printed at 3.9% vs. 3.7% and 4.0% prior (revised from 3.9%); the Trimmed
CPI Y/Y came at 3.7% vs. 3.4% expected and 3.8% prior. </p><p>The US May
Industrial Production printed at -0.5% vs. 0.0% expected and -0.2% prior
(revised from -0.5%). The Capacity Utilization rate came at 78.9% vs. 79.5%
expected and 79.6% prior. </p><p>BoJ’s Governor
Ueda said that there is still some distance to sustainably achieve the 2%
inflation target and that unless their assumption on the need to sustainably
achieve the target changes, their narrative on monetary policy won’t change. </p><p>The US July NAHB
Housing Market Index printed at 56 vs. 56 expected and 55 prior. </p><p>Wednesday:</p><p>New Zealand Q2 CPI
Q/Q came at 1.1% vs. 1.0% expected and 1.2% prior, while the Y/Y measure
printed at 6.0% vs. 5.9% expected and 6.7% prior. </p><p>The UK June CPI
Y/Y came at 7.9% vs. 8.2% expected and 8.7% prior, while the M/M reading
printed at 0.1% vs. 0.4% expected and 0.7% prior. The Core CPI Y/Y came at 6.9%
vs. 7.1% expected and 7.1% prior, while the M/M figure printed at 0.2% vs. 0.4%
expected and 0.8% prior. That’s all misses and the market expectations for the
next BoE’s decision shifted in favour of a 25 bps instead of 50 bps before the
report. </p><p>US Housing Starts
came lower at 1434M vs. 1480M expected and 1559M prior (revised from 1631M).
Building Permits came lower at 1440M vs. 1490 expected and 1491M prior. </p><p>ECB’s Stournaras
(dove – voter) said that inflation is falling, and more tightening could hurt
the economy. He concluded that another 25 bps hike would be enough. </p><p>BoE’s Ramsden
(hawk) said that CPI at 7.9% remains much too high despite falling
significantly. He would like to increase the pace of gilt stock reduction and
added that if there is evidence of persistent pressures, then further monetary
policy tightening would be required. One interesting comment was that he “cannot
rule out next interest rate cycle will get back to 0 lower bound and need to
have room for new QE”. </p><p>Thursday:</p><p>The PBoC left the
Loan Prime Rates (LPR) unchanged at 3.55% for the 1 year and 4.20% for the 5
year. </p><p>The Australian
Jobs report surprised again to the upside with 32.6K jobs added vs. 15K
expected and 75.9K prior. The Unemployment Rate fell to 3.5% vs. 3.6% expected
and 3.6% prior, while the Participation Rate fell to 66.8% vs. 66.9% expected
and 66.9% prior. </p><p>Japan’s Government
bumped up inflation forecasts for the FY2023/2024 to 2.6% vs. 1.7% prior. Moreover,
BoJ’s Governor Ueda dismissed any change coming at the next week’s meeting.</p><p>The US Philly Fed
Manufacturing Index came at -13.5 vs. -10.0 expected and -13.7 prior. Since the
1970s the Philly Fed index below -25 had a 100% hit rate in leading to
recessions. We have already hit -31.3 this cycle. Chart from @gameoftrades_ on
twitter.</p><p>The US Initial
Claims came at 228K vs. 242K expected and 237K prior, while Continuing Claims
increased to 1754K vs. 1729K expected and 1721K prior (revised from 1729K).
This initial claims data corresponds with the NFP survey week. </p><p>The US Leading
Economic Index printed at -0.7% vs. -0.6% expected and -0.6% prior. This is the
15th fall in a row. </p><p>Friday:</p><p>Japan CPI Y/Y
printed below expectations at 3.3% vs. 3.5% expected and 3.2% prior, while the
Core measures was in line with expectations at 4.2% vs. 4.2% expected and 4.3%
prior. Core inflation is still at a four decades high. </p><p>UK June Retail
Sales M/M came at 0.7% vs. 0.2% expected and 0.1% prior (revised from 0.3%),
while the Y/Y measure was at -1.0% vs. -1.5% expected and -2.3% prior (revised
from -2.1%). The Retail Sales ex-Autos, Fuel printed at 0.8% vs. 0.2% expected
and 0.0% prior (revised from 0.1%), while the Y/Y reading was -0.9% vs. -1.6%
expected and -1.9% prior (revised from -1.7%). </p><p>Reuters reported
that the BoJ is leaning towards keeping yield control steady next week citing
five sources familiar with the central bank’s thinking as policymakers prefer
to scrutinise more data to ensure wages and inflation keep rising. The JPY sold
off across the board following the news. </p><p>Canada May Retail
Sales came at 0.2% vs. 0.5% expected and 1.0% prior (revised from 1.1%), while
the Core measure was 0.0% vs. 0.3% expected and 1.2% prior (revised from 1.3%).
Retail Sales Y/Y printed at 0.5% vs. 2.9% prior.</p><p>The highlights for
next week will be:</p><ul><li>Monday:
US S&amp;P Global PMIs.</li><li>Tuesday:
US Consumer Confidence.</li><li>Wednesday:
Australia CPI, FOMC Policy Decision.</li><li>Thursday:
ECB Policy Decision, US Jobless Claims.</li><li>Friday:
BoJ Policy Decision, US PCE, US ECI.</li></ul><p>That’s all folks,
have a great weekend!</p>

This article was written by Giuseppe Dellamotta at www.forexlive.com.