of the week ahead


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, as we look into next week, I think it's fair to say that we're going to be less data dependent, to borrow a phrase, perhaps a bit more policy dependent as we look at the activity over the next week. So perhaps you can just cast your eye into next week and share your thoughts.

Neil Staines

Absolutely, yeah, thanks Matt. It's been another complex week for financial markets, as US inflation and the ECB policy meeting bring the global macro focus squarely back. To the monetary policy trajectory. Now we focus on the ECB rate hike and the implications of the policy decision and the new implied focus on the duration of restrictiveness, as opposed to simply the level further in this week's blog, but, looking ahead to next week, Central Bank decisions and respective monetary narratives will continue to be the central focus, as you say, Matthew. Now, minutes from the RBA and the Bank of Canada and policy decisions from the Swiss National Bank, Riksbank and Norges Bank will be watched with interest. But for us, there are a few key focal points next week.

Firstly, we're very focused on the Bank of England. In a recent blog, we noted our views that signs of more acute weakness in domestic demand, and further future negative implications of tight monetary policy, high nominal prices and high nominal taxes even, that are yet to work through into the real economy, are important for the monetary policy considerations from here. Now furthermore, we're inclined to view the recent statement that there are multiple paths to attain the same economic objective on inflation by both Chief Economist Pill and Deputy Governor Broadbent as a sign of the openness to an extended pause in restrictive policy territory a criteria that bailey was clear has already been achieved at the last meeting. Now we think that a peak is already in place is a significantly higher probability than current market pricing. The inflation print on Wednesday ahead of Thursday's policy decision may well swing the balance. Essential viewing for UK rates and for currency markets.

Secondly, we get more economic data and analysis from the global economy. After a series of recent incremental stimulus measures from China, culminating in a 25 basis point RRR cut this week and some signs of a rebound in the domestic data suite for August, markets will watch China's equity markets for any signs of a rebound in sentiment very closely. Eurozone current account and the OECD economic outlook will be closely watched as well as a gauge or recalibrate expectations for global and national growth. Particular focus should be placed on U.S. growth relative to the rest of the world where we see a narrower differential than current market sentiment with significant implications for FX markets.

And then lastly, and likely most importantly, we get the September policy decision from the Federal Reserve. Expectations for a rate move are close to zero, consistent with recent official rhetoric. The main focus, however, will be in relation to the updated summary of economic projections. Particular financial market scrutiny will be placed on the updated growth and inflation projections. Again, relevant not just to monetary policy, but also growth differential expectations globally and the updated dots or Fed member expectations for the future rate path. Another complex week for financial markets, no doubt with central banker’s center stage and growth increasingly the focus.

Matt Jones

Absolutely. A big week ahead with a lot to focus on. In the meantime. We have the weekend and dare I ask, what have you got your eye on?

Neil Staines

Absolutely. Yeah. Thanks, Matt. The weekend gets off to a sporting start on Friday with the final England, New Zealand, one-day international, the last before the World Cup which is imminent and also a fitting tribute to our hundredth episode today Matthew and I metaphorically raising our bats to the crowd. Premiership football is back after the international break. Manchester United versus Brighton will be an interesting battle, but the pick of the weekend action is clearly the top-of-the-table clash between last year's European champions and Manchester City. Formula One is in Singapore for the iconic Marina Bay Grand Prix, even if this year's Drivers Championship is likely already done and dusted. But for me, it's all about the rugby again. Second round or penultimate group stage games, Ireland versus Tonga, Australia versus Fiji, and England versus Japan. The pick of the bunch, England very much looking to keep all of its players on the field this weekend.

Matt Jones

Absolutely, that would be a good start. Neil, thank you very much for joining us once again and for sharing your thoughts on the week ahead. I'm hoping that you bought cake to celebrate the 100th episode because I clearly forgot.

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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