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 Jones, 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.
Thank you very much Matt. It's great to be here.
As we look into next week, there's obviously many factors at play in quite a as ever complex macroeconomic backdrop. And a big week for the UK with a lot to iron out from a macro perspective. Perhaps you could just take us through next week and what you're gonna be focusing on in particular.
Yeah, absolutely. Thanks very much, Matt. It's another complex week for financial markets a week in which with a distinct DM Central Bank focus as the Fed, ECB and Bank of Japan meetings grabbed the headlines and a surprise cut from China highlighted the disparity or divergence of global central bank policy cycles. Next week, the impact of these policy decisions likely continue to ruminate and there are a number of focal points for us that stand out.
Firstly, we get a further focus on global growth momentum as well as regional disparities with the release of the flash global PMI data for June. Now, these data will be watched very closely with Europe and Asia of key importance. Now, more broadly, we get RBA minutes from the June meeting where details of the RBAs views on the balance of risks to growth and inflation will be keenly watched for inference about the future rate path. Canadian retail sales data will have a similar reference after the Bank of Canada ended its pause with a hike just recently. Swiss National Bank and Norges bank policy decisions on Thursday add further color to the bait on global growth momentum and divergences and will all be keenly watched.
Secondly, the impact of this week's FOMC will continue to be digested by markets into next week and beyond. Now, we discussed the Fed pause forward guidance, DOTs and the SEPs in further detail in this week's blogs. But as we approach the terminal rate in the US the incremental commentary from Fed speakers will be critical to the balance of risks. From our perspective, while many commentators view the projections from the June meeting as a hawkish surprise, it's likely that the broad economic projections set a high bar or a high economic sensitivity to delivering the projected rate hikes, particularly given the new emphasis on the pace of tightening implying slower hikes against the backdrop of a slowing growth and rebalancing supply and demand backdrop in the U S. Fed comment and market price action in the US yield curve will remain an acute focus through next week.
Then lastly, but by no means leastly next week will be a huge week for the UK. Now, from a data perspective, we get a very important CPI print where markets are expecting headline inflation to drop to 8.4% year on year, although that is still above expectations for last month's data print and a 6.7% year on year core measure. And a retail sales print also for May, which is likely to show continued weakness in consumer demand. Now these two prints and the broader economic trajectories around them highlight the core difficulties of the current monetary policy debate in the UK. A debate which will be central to the Bank of England's policy decisions on Thursday. With National Press highlighting the volatility in consumer mortgage markets, the Bank of England will be under pressure to deliver a clear narrative around the policy path and or an explicit focus on the balance of risks to this complex growth inflation dynamic. The Bank of England are expected to height 25 basis points to 4.75%, but it is likely this Thursday is more about what they say than what they do. Huge week for the Bank of England, huge week for the UK more broadly.
Absolutely. A big week indeed, and one that we'll be watching very closely. In the meantime, of course, as ever it is the weekend. And I think we're probably spoiled for choice, and you no doubt have many irons in the fire. So perhaps you can just talk us through what you're gonna be keeping an eye on over the weekend.
Absolutely, yeah. Thanks Matt. The football season now officially over with Man City and of course Westham United Champions of Europe. Focus now turns to the summer transfer window. Now Formula One heads to Canada with signs Mercedes are improving the pace and who knows it may soon be able to compete with the Red Bull. Athletics is back with the European Team Championships in Poland and a very interesting US Open golf tournament after the merger of the Saudi Back LIV tournament with the US and European tours, certainly cause for some additional tension at the Los Angeles Country Club at the weekend. But for me this weekend is all about the cricket, with the first Ashes test from Edgbaston. The Ashes will be an exciting prospect throughout the summer, and let's hope this sunshine continues.
Thank you Neil. Lots to enjoy over the weekend, although I'm sure many will be mourning the end of the football season at least though for some it seemed to finish quite well. Personally, I'm very much looking forward to the cricket and I will be keeping a close eye on that over the weekend. Thank you for joining us once again and 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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