In this episode:
- US Data and Macro Focus
- The Sintra Summit and Global Central Bank Watch
- Geopolitics, Fiscal Policy, and Trade Dynamics
US Data and Macro Focus
- Hard vs. Soft Data Divergence: Markets are watching whether survey-based weakness or resilient hard data tells the true story — with potential tariff front-loading clouding the signals.
- Labor Market in Focus: Non-farm payrolls, JOLTS, and ADP data are central, with attention on rising unemployment and steady wage growth as indicators for Fed policy direction.
- Policy Sensitivity Increasing: Slowing growth and sticky inflation suggest data will play a larger role in shaping rate expectations and positioning.
The Sintra Summit and Global Central Bank Watch
- Top-Table Signals: Tuesday’s ECB panel featuring Lagarde, Powell, Bailey, Ueda, and Rhee will be closely watched for any guidance on front-end rate expectations.
- Regional Divergences: Central banks face differing inflation and growth conditions — from Japan’s Tankan report to the ECB’s neutral-rate cut and BoK’s easing trajectory.
- UK Rate Cut in Sight: Bailey appears set for an August rate cut to 4%, adding to the broader narrative of cautious global disinflation.
Geopolitics, Fiscal Policy, and Trade Dynamics
- US Fiscal Deadline Looms: The “Big Beautiful Bill” could deliver tax cuts and remove summer debt ceiling risks — with markets watching the July 4 timeline closely.
- Trade Deadline Approaches: The July 9 end to the 90-day trade review period brings key decisions for US deals with China, India, South Korea, the EU, and Japan.
- Risk Still Undervalued: Despite lower volatility around the Middle East, geopolitical risk premiums may be underpriced given lingering uncertainty and policy flashpoints.
Transcript (AI Generated)
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 after a period of relative quiet on the global data front, next week sees a huge concentration of important data updates. So what are we looking out for next week? Perhaps starting in the US.
Neil Staines
Yeah, absolutely. Thanks, Matt. It really is a huge week for data next week as markets refocus on the macro after a period of geopolitical turbulence and subsequent market relief. Now, given the clear monetary policy dichotomy between the negative trajectories of both growth and inflation from a policy perspective, at the current juncture, the data is likely a more acute driver of positioning and sentiment going forward.
Over recent months, there has been a big debate about the economic trajectory, as the soft or survey data have weakened sharply, while the hard data has held up surprisingly well in many respects. Is the survey data highlighting unrealized concerns amid heightened uncertainty? Or is it the hard data that's buoyed by front-loading ahead of prospective tariffs?
We're certainly gonna find out over the coming months, and this week is a good start. So, on the soft data side, we get the US manufacturing and services ISM, both surveys. They are the key sector sentiment barometers, essentially, and the monetary policy-relevant components of employment and prices on the sub-component level are gonna be very keenly watched next week, so that's gonna be very important.
And on the hard data side, we get JOLTS, ADP, and, of course, non-farm payrolls. And on that payroll report, we're looking for headline job gains of around 120,000, significantly reduced from the start of this year, with the unemployment rate edging up to 4.3% and average hourly earnings unchanged around 3.9%.
All of those will be relatively consistent with monetary policy unchanged, although there is a greater sensitivity towards unemployment edging higher over the coming months and quarters. Overall, though, it's gonna be a huge week for US data.
Matt Jones
And of course, next week, the world's monetary authorities meet in Sintra, Portugal for the ECB forum on central banking. How are we looking at this and the global data next week?
Neil Staines
Yeah, absolutely. It's that time again, central bankers gathered in the Sintra Hills to discuss global monetary policies. The key event is the top-table panel discussion on Tuesday afternoon, containing ECB's Lagarde, Bank of England's Bailey, the Fed's Powell, Bank of Japan's Ueda, and the Bank of Korea's Rhee, and markets will be closely monitoring responses from all and any inference in relation to current front-end rate pricing.
Bank of Japan Governor Ueda's comments will come after the Q2 Tankan report gives us an update on Japanese corporate health and confidence. Lagarde’s against the release of the flash CPI print for June is of particular interest, with the ECB having just cut rates to that neutral level.
Bank of England's Bailey has been a little bit more dovish of late, not quite where we would like him to be in terms of our viewpoint on the UK economy, but Bailey does look set to sanction another UK rate cut in August, taking us to 4%. We're looking out for sentiment in that regard.
Powell is likely to be the least awaited this time out, only really due to the proximity of recent Fed and Humphrey Hawkins testimonies. But we'll still be watching very closely for anything in relation to the balance of risks on the Federal Reserve Board at the moment.
And the Bank of Korea's Rhee, having cut rates to two-and-a-half percent at the end of May from a peak of three-and-a-half percent, markets are still debating one more cut in either the second half of 2025 or the first half of 2026 from the Bank of Korea. So, thus, all of the respondents and that overall global narrative are gonna be very closely watched next week—a big week for global central bankers.
Matt Jones
Given the recent volatility and areas of macro and geopolitical uncertainty, I suspect we will also be watching the headlines very closely next week.
Neil Staines
Yeah, I think that's absolutely right. While the acute market concern over the Middle East conflict has abated somewhat, geopolitical risk premium likely remains high. Although, from my perspective, the risk’s not necessarily sufficiently priced by markets over the coming weeks.
On Friday, the 4th of July, US Independence Day holiday, is the aspirational deadline for the Big Beautiful Bill in the US. It's gonna be very important for the landing zone, really, for US fiscal support, predominantly tax cuts but also increasing the debt ceiling, which will itself remove some of the risks throughout the summer.
Also, as we now understand, the removal of the controversial Section 899 from the bill, known as the revenge tax clause, after agreement of the G7 also will likely calm markets once that bill is actually signed off, possibly by the end of next week.
Next week is also likely to see US trade discussions feature heavily, as the 9th of July 90-day deadline fast approaches. China is done, according to headlines today; India and South Korea are close. Although the EU and Japan may be a little bit more complicated, going down to the wire, and they are gonna be clear focal points for next week.
Overall, from a data, monetary, fiscal, and geopolitical standpoint, next week is still a huge and diverse focus for markets.
Matt Jones
Fantastic. 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 time.
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