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.
Thank you very much Matt. It's great to be here.
So, as we look into next week, I think there's pretty much a focus on developed markets and the inflation and growth dynamics. Can you just talk us through what in particular you're going to have an eye on in the week ahead?
Absolutely. Yeah. Another complex week for financial markets with a continuation of the developed market central bank activity that has taken center stage over the past couple of weeks. A topic we discuss in greater length in this week's blog, this week centering on the Bank of England. However, the complexity in global markets has been exacerbated by concurrent events in the U.S. A rating downgrade from Fitch that refocused markets on the fiscal trajectory of the U. S. And a refunding schedule from the Treasury highlighting the significant pickup in issuance to fund the fiscal deficit. Against all this, the debate around long term equilibrium rates and inflation have seen long end bonds come under acute pressure and the resultant high yields pressure the wider macro universe. A complex backdrop for financial markets with a couple of things in particular we're looking out for next week.
Firstly, following on from this week's more moderate payroll data in the U. S. and the awkward or disjointed macro settings we have outlined, a big focus for next week will be on market sentiment, especially against a likely summer holiday liquidity or participation deficit, and a period of relative quiet on the data front at the start of next week. Now, market stability and barometers of risk sentiment will be a key focus, tactical hats at the ready for coming days and weeks.
Secondly, markets get the chance to reflect on the Bank of England. A hike of 25 basis points to 5. 25% last week and a more dovish or from our perspective, at least sentiment from the press conference. From our perspective, the increasing focus on growth risks and the reduction in projected upside inflation risks. Especially as Bailey was very clear to categorize current policy settings as restrictive and having a weakening impact on activity are significant policy pivots, one that leads us to see the policy peak as a significantly lower than currently markets are pricing. The Chief Economist, Huw Peel, speaks on Monday. The economic narrative will continue to be a big focus for the UK.
And then lastly, on Thursday, we get the other key data print in the Fed's data dependent policy focus ,CPI. Markets expect a slight uptick in the annual measure to 3. 2% year on year in July. But market sensitivity to any data miss likely remains acute, especially against a backdrop of a more clear focus on the treasury yield curve. A big week for U. S. data, for U. S. rates, and wider market sentiment, as we say, against the potentially lower participation of summer markets.
Fantastic. Thank you, Neil. A lot to look out for in the week ahead. Although I think we can use the term summer quite loosely in the UK. In the meantime, though, of course, we have the weekend. And what have you got your eye on?
Absolutely. Plenty to look at again this week. Women's World Cup, last 16 games. Sweden versus the USA on Sunday. And England versus Nigeria on Monday. The pick of the bunch from my perspective. Formula One is in the summer recess, even if it's unlikely that school is out for many of this year's teams and remarkably, the football regular season gets off to a start with the championship season fixtures kicking off recently relegated Southampton away to Sheffield Wednesday and excitement of the FA Cup starts with qualifying games up and down the country. For me, though, this weekend will be all about the rugby, starting early on Saturday morning with the return leg of New Zealand versus Australia and all the home nations in action throughout the day with England away to Wales, making a perfect Saturday evening entertainment.
Fantastic. I'm very much looking forward to that indeed. 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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