Transcript
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So, looking into next week, I think there's a continuation of a theme, really? Central banks data and developed markets. So perhaps you can just talk us through what you're going to be, keeping an eye on in the week ahead.
Neil Staines
Absolutely. Yeah. Thanks, Matt. It's been another complex week for financial markets. With developed market central banks front and centre. The Fed and the ECB, both hiked rates by 25 basis points and switched the emphasis of future policy decisions to the evolving growth backdrop. The Bank of Japan, surprise policy tweak added to the volatility and complexity of the rate backdrop in developed markets. We discuss this further in greater detail in this week's blog. But it's worth noting that the greater data focus of monetary policy in developed markets has important connotations for next week. And in that respect, we have a few thoughts.
Firstly, it is that week again. Next week culminates with the US employment report on non-farm payrolls. A very important report in the Fed's data focus proceeded by JOLTs and ADP surveys that will give a more rounded inference on labor market trajectory and also the manufacturing and service sector ISM Data, which added to the broader descriptive narrative on forward looking economic momentum. A big week for US data and therefore, a big week for US rates and the Dollar.
Secondly in Europe, we start the week with a concentrated focus. After the ECB clearly emphasized both growth and inflation dynamics in determining their forward rate reaction function, flash readings for the Q2 GDP and for the July CPI print on Monday will be very keenly watched. Friday's GDP data from France and CPI data from Spain suggest some potential for a positive surprise, countering the ECBs concern, an important start to the week indeed.
Then finally, or in-between we get the Bank of England. The UK clearly has the most complex growth inflation trade-off at the current juncture. The most recent inflation print for June saw a downside surprise for the first time in a while. If we add to this, the fact that both the ECB and the Fed appear more concerned about growth and the added pressure on the bank of England. From advisors to the treasury who stated this week, that they were increasingly concerned that the bank risks raising interest rates too much over coming months, then the reaction function of the bank of England is less clear than it might have been perceived at the start of the month. For us 0, 25 basis points and 50 basis point moves are all on the table. A big week for UK rates for Sterling and of course, for anyone in the UK with a mortgage.
Matt Jones
A big week, indeed. In the meantime, though. We have the weekend potentially a big weekend as well. What have you got your eye on?
Neil Staines
We certainly have Matt, women's football world cup continues. The lionesses securing qualification this morning. France v Brazil, Sweden v Italy, the big games over the weekend. With England's final group game versus China on Tuesday. Formula one travels to Belgium, that's still nothing that can keep pace with the Red Bulls at the moment, sadly for the neutral supporter. Some very notable rugby games over the weekend with Australia versus New Zealand on Saturday morning the pick of the bunch, but for me this weekend is all about the cricket, the final Ashes tests from the Oval. England looking to avoid the rain and secure a draw in the series far more serious than that sounds.
Matt Jones
It is indeed. Thank you, Neil, for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
Thank you for joining us for "The Long and Short of the Week Ahead". Further insights are available on our website eurizonsljcapital.com/insights. We look forward to you joining us again next week for more insights into macro-economic events and "The Long and Short of the Week Ahead".
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