The Week Ahead: 10th -14th July

A paradigm shift is occurring in Global Financial Markets. Since the nadir or the Global Financial Crisis, Leading Central Bankers have been flooding the world with liquidity in the form of Quantitative Easing and ultra-low rates. To their credit, the financial apocalypse was averted but the big question is what long-term effects these policies may have in the future, especially when they are put into reverse. And so it has proven. Global Central Bankers appear eerily coordinated, making hawkish noises, from Canada, to the US, Europe and here in the U.K.

Central Banks have largely tied economic data to their decision making on the tapering of QE and the raising of rates: for the US it is the overall unemployment rate, while for the UK it is inflation. On Friday, Non-Farm Payroll data showed that the US economy is adding jobs at a faster rate than expected and in the UK, inflation is well above the 2% target / limit, largely due to a Brexit-weakened Pound, which has driven up both core and non-core inflation. Both these phenomena speak to higher rates in future.
Hawkish commentary has triggered pandemonium in bond markets because rising interest rates make bonds less attractive. A broad-sell off in bonds filtered over into Equity markets, which also had a torrid week. Sterling could not hold ground above key price levels against peers and slid towards the end of the week. Accordingly, next Tuesday’s UK Inflation Report hearings will be the most significant economic event of the week and will offer more insight as to what might be to come on the rate-hiking front.
Looking forward to next week, there will be some closely watched economic releases in Europe, notably German Trade Balance data on Tuesday and Europe-wide CPI data on Thursday. In the US, there is Fedspeak galore – Janet Yellen testifies on Thursday – and Friday’s retail sales will be closely watched.

07:00    EUR Exports (MoM) (May) -0.9%
07:00    EUR Trade Balance s.a. (May) – €19.8B
07:00    EUR Current Account n.s.a. (May) – €15.1B
07:00    EUR Imports (MoM) (May) – 1.2%
15:00    USD Labor Market Conditions Index (Jun) – 2.3
00:01    GBP BRC Like-For-Like Retail Sales (YoY) (Jun) -0.4%

11:00    GBP Inflation Report Hearings REPORT

09:30    GBP Average Earnings excluding Bonus (3Mo/Yr) (May) – 1.7%
09:30    GBP Average Earnings including Bonus (3Mo/Yr) (May) – 2.1%
09:30    GBP Claimant Count Rate (Jun) – 2.3%
09:30    GBP Claimant Count Change (Jun) – 7.3K
09:30    GBP ILO Unemployment Rate (3M) (May) – 4.6%
11:00    EUR Industrial Production s.a. (MoM) (May) – 0.5%
11:00    EUR Industrial Production w.d.a. (YoY) (May) – 1.4%
19:00    USD Fed’s Beige Book REPORT

07:00    EUR Consumer Price Index (YoY) (Jun) – 1.6%
09:30    GBP BOE Credit Conditions Survey REPORT
13:30    USD Producer Price Index (YoY) (Jun) – 2.4%
13:30    USD Initial Jobless Claims (Jul 3)
13:30    USD Continuing Jobless Claims (Jul 3)

11:00    EUR Trade Balance s.a. (May) – €19.6B
11:00    EUR Trade Balance n.s.a. (May) – €17.9B
13:30    USD Retail Sales (MoM) (Jun) – 0.3%
13:30    USD Consumer Price Index (YoY) (Jun) – 1.9%
13:30    USD Consumer Price Index Ex Food & Energy (YoY) (Jun) – 1.7%
13:30    USD Consumer Price Index (MoM) (Jun)