Weekly Market Outlook (24-28 June)

UPCOMING EVENTS:

• Monday: BoJ
  Summary of Opinions, German IFO.
• Tuesday:
  Canada CPI, US Consumer Confidence.
• Wednesday:
  Australia Monthly CPI.
• Thursday: Japan
  Retail Sales, US Durable Goods Orders, US Final Q1 GDP, US Jobless Claims.
• Friday: Tokyo
  CPI, UK Final Q1 GDP, Canada GDP, US PCE, University of Michigan Consumer
  Sentiment (final).

Tuesday

The Canadian CPI Y/Y is expected at 2.6%
vs. 2.7% prior, while the M/M measure is seen at 0.3% vs. 0.5% prior. The
Trimmed Mean CPI Y/Y is expected at 2.8% vs. 2.9% prior, while the Median CPI
Y/Y is seen at 2.6% vs. 2.6% prior.

The last
report showed the underlying inflation
measures falling back inside the BoC’s 1-3% target band which gave the central
bank the green light to deliver the first
rate cut. The market sees a 67% chance of
another rate cut in July but that will depend on the CPI data this week.

The US Consumer Confidence is expected at
100 vs. 102 prior. The last
report showed confidence improving after
three consecutive months of decline. The Chief Economists at The Conference
Board highlighted that “the strong labour market continued to bolster
consumers’ overall assessment of the present situation”.

Moreover, “looking ahead, fewer consumers
expected deterioration in future business conditions, job availability, and
income”. The overall confidence gauge remained within the relatively narrow
range it has been hovering in for more than two years. The Present
Situation Index will be something to watch given the recent misses in the US
Jobless Claims as that’s generally a leading indicator
for the unemployment rate.

Wednesday

The Australian Monthly CPI Y/Y is expected
at 3.8% vs. 3.6% prior. As a reminder, the last
report surprised to the upside with the
underlying inflation measures remaining sticky at higher levels. The RBA kept a
hawkish stance at the latest
policy meeting as it reiterated that
“inflation remains above target and is proving persistent” and added that
“inflation is easing but has been doing so more slowly than previously
expected”.

For this reason, the central bank kept all
options on the table by “not ruling anything in or out”. Some better inflation
data won’t change much for the market, but another disappointment could add some slight chances of a rate hike. The RBA is expected to remain on hold until
mid-2025.

Thursday

The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s
a timelier indicator on the state of the labour market. Initial Claims keep on
hovering around cycle lows, while Continuing Claims remain firm around the
1800K level.

This has led to a weaker
and weaker market reaction as participants become used to these numbers.
Nonetheless, in the last two weeks we started to see the data missing
expectations although it remains below the cycle highs. This is something
to keep an eye on.

This week Initial Claims
are expected at 236K vs. 238K prior, while Continuing Claims are seen at 1820K vs.
1828K prior.

Friday

The Tokyo Core CPI Y/Y is
expected at 2.0% vs. 1.9% prior. Inflation in Japan is basically at target and
there are no strong signals that point to a reacceleration. It’s hard to see a
rate hike given that Japan strived to achieve inflation for decades and it
might ruin this accomplishment by tightening policy. The data shouldn’t change
anything for the BoJ which is expected to trim bond purchases by a
“substantial” amount at the next policy meeting.

The US Headline PCE Y/Y is
expected at 2.6% vs. 2.7% prior, while the M/M measure is seen at 0.0% vs. 0.3%
prior. The Core PCE Y/Y is expected at 2.6% vs. 2.8% prior, while the M/M
reading is seen at 0.1% vs. 0.2% prior. Forecasters can reliably estimate the
PCE once the CPI and PPI are out, so the market already knows what to expect. This report won’t change anything for the Fed as the central bank remains in a “wait and
see” mode until September at very least.