Week Ahead Preview
Last week was quiet on the data front, but quite tumultuous for global financial markets. Despite no major data points and no new central bank rhetoric, stocks and commodities fluctuated wildly and closed significantly lower as energy prices continues to weigh on sentiment in Europe, and US economic data slowed down.
The positive development of the week for the U.S. was the continuing decline in natural gas prices, while European power prices in France and Germany have hit all-time highs on the forwards markets for electricity this winter.
The OPEC meeting was a non-event, but oil prices remained volatile leading to a slightly positive close in a $10 range. The ongoing escalation of the Ruso-Ukrainian war in the Donbass region led to some of the first strikes on Russian cities on part of Ukrainian forces.
Economic data highlights
Monday 4th of July
·????????US Independence Day
·????????EU German Trade Balance
·????????EU ECB Speakers
·????????CA Canadian Manufacturing PMI
Tuesday 5th of July
·????????CN Service PMI
·????????AU Interest Rate Decision
·????????EU & UK Composite and Services PMIs
·????????US Factory Orders
Wednesday 6th of July
·????????EU German Factory Orders
·????????UK BoE’s Pill Speech
·????????EU Retail Sales
·????????US Services ISM & PMI, Fed Minutes
Thursday 7th of July
·????????AU Trade Balance
·????????UK House Prices
·????????US ADP Employment Change, Jobless Claims
·????????CA Ivey PMI, Trade Balance
Friday 8th of July
·????????US Non-Farm Payrolls, Unemployment
·????????CA Non-Farm Payrolls, Unemployment
Expect slow trading on Monday with the US out for Independence Day. The German Trade Balance went into negative territory for the first time since 1991 as energy prices continued rising and exports into the rest of the EU fell more than expected. ECB speakers and BoE’s Pill will weigh in with some comments on Monday and Wednesday.
Australian Rate Hike Odds
The Reserve Bank of Australia is committed to hiking rates once more, however the size of the rate hike will be crucial to determine the next directional move in the AUD. Another 40 bps could be on the cards, but anything more than that could be positive for the AUD at least over the very short term. The Australian housing market is starting to correct rather sharply and higher rates could accelerate the decline. Consequently, the RBA could be more conservative and lean on slower hikes at least for the time being.
Chinese and European PMIs
The services sector of the Chinese economy has been paralyzed over the past several months due to Covid-19 restrictions. This month’s data could be the first one in a while which sees a material pick-up in the sector. European figures could remain upbeat, as summer holidays spending started off in June.?
US Employment Report
The number everyone will be watching on Friday and beyond is once again related to the US economy’s ability to create jobs. While summer months could benefit from increased demand in the service sector of the economy, overall the market expects a decline in non-farm payroll jobs to 250,000 from 390,000 last month. The Fed watchers will be monitoring this number to ascertain whether the U.S. central bank will have enough ammunition to hike rates another 75 basis points in July.
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