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Week Ahead – Bring on the Fed

Focus on the US next week

Europe took centre stage last week as leaders waited nervously to see if gas would start flowing through Nord Stream 1 again following scheduled maintenance (it did) and the ECB raised its deposit rate to 0%, ending eight years of negative rates. Next week the focus switches back to the US which has a big interest rate decision of its own and a number of major earnings reports.

The Fed is expected to raise interest rates by 75 basis points, although it may be tempted to follow the Bank of Canada in hiking by a full percentage point and show the world it means business. This is happening against the backdrop of mounting recession fears which makes next week’s earnings reports all the more important.

Elsewhere it’s a little quieter on the central bank front which is hardly surprising considering how many we heard from late last week. There’s always the possibility of an inter-meeting decision if a central bank deems it necessary. Many have taken that option over the last couple of years and the SNB is no stranger to surprising the markets. If not, there’s no shortage of economic data which traders will no doubt be scrutinizing for inflation clues.


This week is all about the Fed. On Wednesday, the Fed will have to decide how high they want to raise interest rates this time. The consensus estimate is for a 75 basis point increase, but some are expecting the Fed to slow the pace of tightening to a half-point increase, while a couple of economists think an aggressive full-point increase is justified and on the table.

On Thursday, we will find out if the US fell into a technical recession. The first look at Q2 GDP is expected to show a modest expansion of 0.9%, an improvement from the -1.6% reading from the prior quarter.  The Bloomberg GDP estimate range from 55 economists ranges between -0.6% and 1.2%.

This is also a massive week for earnings. Tuesday will contain quarterly updates from GM, GE, UPS and 3M.  Apple and Amazon both report after the close on Thursday. A lot of traders still believe any stock market rebounds are bear market rallies as the Fed will remain committed to fighting inflation for the rest of the year. If corporate America starts showing more troubles with the jobs market, that could make some investors reassess how aggressive the Fed will be going forward.


In a strange way, the inflation data next week has lost a little something following the ECB’s decision to hike by 50 basis points on Thursday. That decision was taken on the assumption that price pressures are building faster than anticipated and more widespread. It would probably take a shocking number to drastically change expectations. And coming six weeks ahead of the next meeting, a lot can change. That said, in a week of big data points – unemployment, GDP, Ifo – it remains the standout.

Russian gas started flowing along Nord Stream 1 as planned on Thursday, albeit only at 40% as it was before the maintenance began. While a relief, it’s clear that Europe’s energy situation is going to remain extremely challenging in the months ahead given the tendency for flows to be reduced for various reasons.


A quiet week ahead of the Bank of England meeting the week after, at which the MPC is expected to accelerate its tightening with a 50 basis point hike.


The CBR cut rates again on Friday and much more than expected, bringing the key rate down from 9.5% – where it was before the invasion – to 8%. The rouble remains more than 20% stronger against the dollar despite the rate cuts and more are likely to follow. CBR Governor Nabiullina expects the economy to contract less sharply this year than previously thought but for the downturn to be more prolonged. Unemployment and industrial output figures will be released next week.

South Africa

The SARB accelerated its tightening with a 75 basis point hike, bringing the repo rate to 5.5% as it prepares for a prolonged period of above-target inflation. PPI is the only economic release of note next week.


The CBRT opted to continue to bury its head in the sand at its July meeting, leaving the repo rate unchanged at 14% while blaming everything else for eye-watering inflation, which now stands at 78.62%.

The quarterly inflation report will make for interesting reading on Thursday. Enough to change their direction? Almost certainly not although there must come a point when the experiment will need to end.


The SNB is expected to raise interest rates a further 50 basis points when it next meets, with some suggesting it may be higher after inflation hit a 29-year high earlier this month. The central bank does love a surprise though so we can’t discount the possibility of an inter-meeting announcement.

Retail sales on Friday is the only release of note next week.


It is a quiet week for data in China, with just industrial profits on Wednesday, as world markets remain laser-focused on the US FOMC decision later that day.

China sentiment will be driven by political developments at home, notably the ongoing mortgage payment strike by apartment buyers, this is putting more financial pressure on developers. More stress in this sector will weigh heavily on the Shanghai Composite (lots of banks) and the Hang Seng (lots of developers).

Covid-19 cases are rising in China once again and the ever-present risk is that centres like Shanghai or Beijing could face partial shutdowns again. Potentially a major negative for local and regional equity markets.


No significant data in the week ahead. Foreign investors have continued to sell out of Sensex holdings heavily, weighing on the rupee. USD/INR remains near record highs as the current account deteriorates due to high energy prices and domestic export restrictions. The RBI appears to be intervening to cap USD/IDR near 80.00, but a 1.0% FOMC hike this week may see the RBI fold. The RBI may well be considering another unscheduled rate hike, which could be negative for equities.


The Australian dollar remains at the mercy of international investor sentiment flows which have been positive for the past week. It could drop suddenly if investor sentiment swings south.

Australia releases inflation data on Wednesday which should generate short-term volatility. A high print could have markets scrambling to price in more aggressive RBA tightening, which may be positive for AUD and negative for local equities.

New Zealand

New Zealand releases business and consumer sentiment this week. There is substantial downside risk as cost-of-living and weakening property prices bite. A potential negative for local equities.

The New Zealand dollar remains at the mercy of international investor sentiment flows.


Japan has a heavy data week ahead but Friday’s consumer confidence, industrial production and retail sales are the most important. All three could show a gentle recovery which may be positive for local equities, although the Nikkei 225 is mostly correlated to the Nasdaq at the moment.

USD/JPY has fallen below 138.00 on lower US yields. If US yields fall again into the early part of next week, USD/JPY is in danger of a large downward correction to wash out USD/JPY longs. Conversely, a hawkish FOMC decision next week could see the USD/JPY uptrend resume as the rate differential widens.


Singapore releases industrial production on Monday, but Friday’s PPI and import/export prices is likely to be more important. With the MAS already tightening this month, and October’s policy meeting looming, high data prints could see markets’ position for another hike in October, a potential negative for local equities.

Economic Calendar

Sunday, July 24

Economic Events

  • Russian Foreign Minister Lavrov will begin his trip across Africa

Monday, July 25

Economic Data/Events:

  • Germany IFO business climate
  • Singapore CPI
  • Taiwan industrial production
  • A key debate between the UK’s final Conservative Party leadership candidates, Rishi Sunak and Liz Truss

Tuesday, July 26

Economic Data/Events

  • US new home sales, Conf. Board consumer confidence
  • Fed begins 2-day policy meeting
  • Key earnings from Alphabet, GM, GE, UPS and 3M
  • Mexico international reserves
  • Singapore industrial production
  • Bank of Japan releases minutes from its June meeting
  • The IMF releases its world economic outlook update
  • EU energy ministers expected to have an emergency meeting

Wednesday, July 27

Economic Data/Events

  • FOMC decision: Fed expected to raise rates by 75 basis points
  • US wholesale inventories, durable goods
  • Australia CPI
  • China industrial profits
  • Mexico trade
  • Russia industrial production, unemployment
  • Thailand trade
  • EIA Crude Oil Inventory Report

Thursday, July 28

Economic Data/Events

  • US Q2 Advance GDP Q/Q: +0.9%e v -1.6% prior; initial jobless claims
  • Mexico unemployment
  • Australia retail sales
  • Eurozone economic confidence, consumer confidence
  • Germany CPI
  • Hungary one-week deposit rate
  • After the close, Apple and Amazon report earnings

Friday, July 29

Economic Data/Events

  • US consumer income, University of Michigan consumer sentiment
  • Eurozone CPI and GDP
  • France CPI and GDP
  • Poland CPI
  • Czech Republic GDP
  • Germany GDP
  • Italy GDP
  • Mexico GDP
  • Japan industrial production
  • German unemployment
  • Japan unemployment, Tokyo CPI, retail sales

Sovereign Rating Updates

  • Norway (Fitch)
  • Finland (Moody’s)
  • Austria (DBRS)
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