Touching on those in order, the BoJ meeting on Tuesday will warrant greater attention following the various speculation in the media over the last couple of weeks about whether we’ll see a tweak in the yield curve targets. Our economists in Japan expect the BoJ to maintain its current policy stance however. In consideration of the side effects of its policy, the team believe that the BoJ will declare at the end of its statement that, based on its analysis in its quarterly Outlook Report, it will maintain its easing policy for an extended period but will conduct financial market operations and asset purchasing operations to address the mounting cumulative side effects. Our colleagues believe one measure to deal with such side effects will include an overhaul of its ETF purchasing operations (a shift from Nikkei 225-linked ETF to Topix-linked ETF). An increase in the JGB yield target appears unlikely at a time when it is expected to revise downward its inflation forecast.
As for the third central bank next week, the consensus expectation is that the BoE will deliver a 25bp hike on Thursday, something that the market is currently assigning a 90% chance of happening. Should they hike, then this would mark the first time since 2009 that the bank rate would be above 0.5%. It’s worth noting that the latest BoE economic projections will also be released alongside the policy period, including new forecasts for growth and inflation. It’s also expected that BoE Governor Carney will offer an updated view on the neutral rate.
Meanwhile, in terms of the data due out next week, it’s hard to look past Friday’s employment report in the US as being the main focal point. Consensus expectations for July payrolls is 185k, which follows the 213k print back in June. The unemployment rate is expected to fall one-tenth to 3.9% which would put it a tenth above the post-financial crisis low, while average hourly earnings are expected to come in at +0.3% mom which should keep the annual rate at +2.7%.
Meanwhile earnings in the US next week include 145 S&P 500 companies. The big highlights are Caterpillar on Monday – which is always a good barometer for global growth – Apple, Procter & Gamble and Pfizer on Tuesday, Metlife on Wednesday, Dupont on Thursday, and Berkshire Hathaway on Friday. In Europe we’ll also get releases from Volkswagen, Siemens, BP, Barclays and Credit Suisse.
Finally other scheduled events next week which could warrant keeping an eye on include President Trump hosting Italian PM Conte on Monday at the White House, UK Foreign Secretary Hunt co-chairing the China-UK Strategic Dialogue with China counterpart Wang Yi, also on Monday, Russian Foreign Minister Lavrov meeting Japan Foreign Minister Kono on Tuesday, and the US Treasury releasing its latest borrowing plans on Wednesday.
What to look out for next week?
Monday: It’s a quiet start to the week on Monday. Overnight we get June retail sales in Japan. In Europe, we’ll get the preliminary July CPI print for Spain followed by June money and credit aggregates data in the UK and July confidence indicators for the Euro area. In the afternoon we’ll then get the July preliminary CPI report for Germany, while in the US the data includes June pending home sales data and the July Dallas Fed manufacturing activity print. Away from that, President Donald Trump will host Italian Prime Minister Giuseppe Conte at the White House, while earnings highlights include Caterpillar.
Tuesday: All eyes on Tuesday will be on the BoJ monetary policy meeting. Datawise, we get the July GfK consumer confidence print for the UK overnight along with preliminary June industrial production for Japan and July PMIs China. In Europe, we’ll get preliminary July CPI prints for France, Italy and the Euro area along with the advance Q2 GDP release for the Euro area. In the US, June PCE and the Q2 ECI data should be the main focus, while the July Chicago PMI and July consumer confidence data are also slated for release. Apple earnings will also be a big focus, while Procter & Gamble, Pfizer, BP and Credit Suisse numbers are also due.
Thursday: The main focus on Thursday will likely be the BoE’s MPC meeting outcome at 12:00 BST. It’s a quiet day for data in Europe with June PPI for the Euro area the only release of note. In the US, the latest weekly initial jobless claims print is due along with June factory orders data and the final June durable and capital goods orders revisions. Away from the data, the BoJ’s Amamiya will speak overnight. Earnings wise, Barclays, Siemens and Dupont will report.
Friday: We end the week on Friday with the July employment report in the US in the afternoon. Away from that, overnight, we get the BoJ’s June monetary policy meeting minutes along with July services and composite PMIs for Japan and July Caixin services and composite PMIs for China. In Europe the final services and composite PMIs are also due along with June retail sales for the Euro area. In the US, the other data includes the final July services and composite PMI prints along with July ISM non-manufacturing composite. Berkshire Hathaway will report its Q2 earnings.