Three central banks lead the events of the current week

Keep an eye out for inflation figures from Australia, Japan and the PCE

Separate economic data

After growth figures from China, US and British retail sales, inflation from New Zealand, the United Kingdom and Canada, and Australian labor market numbers, in addition to some separate numbers, topped the events of last week.

US Federal

Markets and traders will focus on the meeting of the largest central bank in the world, the US Federal Reserve, which will meet on Tuesday and Wednesday to discuss developments in monetary policy and interest levels, as expectations indicate that the Fed will resume the process of raising interest rates by 25 basis points, to reach 5.50%, the highest level in 22 years.

After ten consecutive meetings of encouraging monetary policy and raising interest rates to combat hyperinflation, which reached peak levels of 9.1% in July of last year, its highest level in 40 years, the US Federal Reserve stopped raising in June.

The latest inflation reading from the United States of America, according to the Bureau of Labor Statistics for the annual indicator over the past 12 months, came at 3% in June compared to 4% in May, while expectations were for an increase of 3.2%, marking the lowest pace of growth since March 2021.

The annual basic index, which excludes food and energy prices, rose to 4.8% on an annual basis in June from 5.3%. According to the estimates of the futures markets from FedWatch issued by CME, the markets are priced to raise interest rates by 25 basis points at the bank’s meeting on Wednesday by 99%, and thus the Fed’s rate hike by 25 basis points became certain this week, but the recent inflation figures and some statements raised the market’s expectations to keep the interest rates at these levels 5.50% in the next three meetings after Wednesday’s meeting (September – November – December) to more than 65% after the markets were expecting another hike before the end of the year, and therefore I expect That the markets focus on this hypothesis in addition to the date of starting to cut interest rates.

European Central Bank

Thursday, the European Central Bank will announce its monetary policy and interest rates, as it is estimated that interest rates will be raised by about 25 basis points, to reach 4.25% on Thursday. Inflation rates in the eurozone slowed down from their peak levels in October of last year, at 10.6%, to reach 5.5% in June in the final reading, the same as the preliminary reading, compared to 6.1% in the May reading.

The statements of European Central Bank President Christine Lagarde and a number of monetary policy makers in the European Central Bank in the previous period support another rate hike to slow inflation and bring it back towards the bank’s target of 2%.

Therefore, investors will focus on Christine Lagarde’s statements at the press conference to read interest rate expectations for the September meeting and the coming period.

Bank of Japan

The Central Bank of Japan will hold its meeting at the end of the week, Friday, in the Asian session, to announce its monetary policy for the coming period and interest rates, as expectations indicate that the bank will keep monetary policy and the interest rate unchanged.

The latest reading of core inflation, which excludes the costs of fresh foodstuffs and issued at the end of the week, came in line with expectations at 3.3% in June, after a growth of 3.2% in May, while the index excluding fresh foodstuffs and fuel prices came at 4.2%, compared to 4.3% in May.

The markets are awaiting any amendments or hints of an amendment to the YCC yield control policy, as the bank surprised the markets in its last meeting at the end of December of last year and modified the yield ceiling for Japanese government bonds for ten years and allowed the yield to fluctuate up to about 0.50% higher or lower compared to its previous target of 0.25% in an unexpected step for the markets in a process similar to raising interest rates, which opened the door for the bank to abandon its facilitative policy.

Since the beginning of the new governor’s phase, Oeda last April, the markets are betting that the bank’s monetary policy will change in the current year, but Oeda announced more than once that he prefers to wait and monitor inflation and wages data before making any decision. Will the Friday meeting be the date?

Inflation figures from Australia

In addition to the meeting of the three central banks, the markets are awaiting inflation figures for Australia, Tokyo and Germany, and inflation in consumer spending from the United States of America, or the preferred indicator of the well-known Fed, PCE. Tomorrow morning, Wednesday, quarterly inflation figures will be released from Australia for the second quarter of this year.

Estimates indicate a slowdown in inflation to 1% on a quarterly basis, from 1.4% in the first quarter, and by 5.5% in June compared to 5.6% in May. Inflation numbers from Australia will determine the bank’s direction at its next meeting in August and whether it will continue to tighten monetary policy or stop raising, hence the importance of tomorrow’s numbers.

Separate data that we follow during the week

Monday

New Zealand Trade Balance

Services and manufacturing PMI for Australia, Japan, Eurozone, UK and USA

Tuesday

Inflation from Japan

German Confidence Index

US consumer confidence

Wednesday

Inflation from Australia

US home sales

US crude oil inventories

US Fed meeting

Thursday

European Central Bank

Read Growth for the USA

US unemployment benefits

Durable goods orders

Friday

Inflation from Tokyo

Bank of Japan meeting

Inflation from Germany

growth from Canada

US consumer spending inflation index