This week promises to be a very busy one with no less than four central banks due to release interest rate decisions. For what it’s worth, all four banks are expected to remain on hold but traders do see a small chance that the RBA may cut rates now ahead of the more widely expected cut in September.
We begin the week with a high volatility event from New Zealand on Sunday night. Unit Labour Costs are expected to show a 0.8% increase QoQ.
On Tuesday morning we have the first of our scheduled interest rate statements, which comes from the RBA. Rates currently stand at 7.25% and the majority of economists expect the RBA to stay on hold however some are not as convinced. A string of recent weak economic data from Australia has caused the market to price in a quarter percent drop by the end of the year at least. At this point it would seem likely that the RBA will use the statement to put forward the case for an interest rate cut, essentially preparing the market for the following month.
Tuesday morning’s London session will be busy with three high volatility events due from the UK. First of all the Halifax House Price Index is expected to show a monthly decrease of 1.5% in the cost of UK homes. This economic release date is tentative and could fall at any time over the next week. At 09:30 Manufacturing Production MoM and Services PMI will be released. The UK manufacturing sector is expected to respond modestly to a 0.5% decrease in value of manufacturing output in June with a 0.1% increase in July. Services PMI is expected to drop to 46.7 from 47.1, a number which still shows contraction in the Services industry.
Also on Tuesday we have the ISM Non-Manufacturing Composite. The number is due to show contraction with 48.6 expected. Later on in the NY session is the FOMC Interest Rate Statement. Rates currently stand at 2.00% with no move expected. High volatility is likely with traders still anticipating a rate hike if anything.
Following on from the RBA Interest Rate Statement the previous day we will see Australian Home Loans early Wednesday morning. The number is expected to drop by 2.1% MoM after a 7.9% fall in June. Also due on Wednesday at 15:00 is the Canadian Ivey PMI. This is a broad economic indicator because it surveys all sectors of the economy. The indicator is expected to come in at 62.0 after a 69.6 June reading. Rounding up Wednesday we have high volatility news from New Zealand. Employment Change and Unemployment Rate will be released with 0.1% and 3.8% expected respectively.
On Thursday we will have the last two interest rate announcements but prior to this we will see employment data from Australia. Employment Change and Unemployment Rate are both due with the Australian economy expected to have added 4K jobs in July. Despite this increase in jobs, unemployment is expected to have increased to 4.3%. At midday we have the BOE Interest Rate Statement. Rates are expected to remain on hold at 5.00%. Traders will be interested in the wording of the statement with the BOE expected to sight rising inflation and a flagging economy in their decision the keep rates where they are.
At 12:45 the ECB Interest Rate Announcement is due. The rate is expected to remain on hold in the face of high inflation (the CPI Flash Estimate released last week showed a 4.1% annual rate). However, economists are becoming increasingly sceptical of the Eurozone’s economic strength. A large amount of attention will be paid to the ECB press conference that follows the rate announcement. Traders will be looking for clue to future moves with Trichet expected to maintain that inflation will come under control towards the end of the year. Spain’s Solbes has commented in recent days that he expects to see 4% inflation by the end of the year, pending oil price stabilisation.
The afternoon session will see high volatility construction events from Canada and the US. At 13:30 (the same time as the ECB Press Conference) Canada will release its Building Permits figures. The number is expected to fall by 1.0% MoM. At 15:00 we will see US Pending Home Sales. It is believed that this number is more forward looking than Existing Home Sales and high volatility can be expected. A drop of 1.0% is expected following a MoM decrease of 4.7% in the previous month.
Rounding up the week on Friday we have a quieter day in store. There are two high volatility events due from Canada, both of which showcasing Canadian employment health. Employment Change is expected to follow a decline of 5.0% in June with an increase of the same number for July while the Unemployment Rate should hold firm at 6.2%.
