Inflation data from UK, Eurozone and South Africa top modest run of data, with US Housing Starts also due; ECB and BoE speakers; busier run of earnings headlined by Goldman Sachs and Tesla; German, UK & US auctions
U.K. CPI: some relief as transport drags headline and lower, but Services still very sticky; should be enough to prompt BoE to revert to 25 bps hike, focus turns to Ramsden speech
ECB hawks tone down rhetoric, suggesting peak may be closer at hand
EVENTS PREVIEW
Inflation data from the UK, Eurozone and South Africa features along with US Housing Starts and a busier and more varied run of US corporate earnings. While Goldman Sachs and Tesla will attract most attention in terms of the latter, there are also results from the resource sector via way of Alcoa, Baker Hughes and Halliburton, as well as IBM, Netflix, Northern Trust and United Airlines. There are two hawkish leaning central bank speakers, ECB’s Vujcic and BoE’s Ramsden, with the focus on whether Vujcic follows arch hawks Knot and Nagel who yesterday pushed back quite hard on the idea of a September rate ECB rate hike, while Ramsden speaks on the BoE’s quantitative tightening programme and obviously hot on the heels of the inflation data. Govt bond supply comes via way of UK 5-yr, German 30-yr and the unloved US 20-yr. US Housing Starts are forecast to see a reactive correction of -9.6% m/m after May’s 21.2% m/m surge to a very long-term average 1.48 Mln SAAR pace.
** U.K. – June CPI, RPI & PPI **
Finally, some relief on UK inflation, with a 0.0% m/m drop in transport prices accounting for much of the lower than expected 0.1% m/m 7.9% y/y reading on headline, while core also undershot forecasts at 6.9% v3. an expected 7.1%. But inflation remains very high, and Services CPI remains very sticky at 7.2% y/y vs. prior 7.4%, and the easing in Food Prices to 0.4% m/m, still leaves the y/y rate at a whopping 17.3% y/y (prior 18.3%). PPI again underlined little in the way of pipeline pressures with core PPI Output falling 0.2% m/m. This may be just enough of a drop to allow the BoE to hike rates by 25 bps in August rather than 50 bps, and the peak in rates is likely to be lower than the previously expected 6.5%, with markets now looking for rates to peak close to 6.0%
** Eurozone – June final CPI **
June final HICP is expected to be unrevised, with headline falling to 5.5% from 6.1% y/y, but core edging up 0.1 ppt to 5.4% y/y, but it will be the details on so-called super core (last 6.8% y/y) and low volatility inflation (last 5.3% y/y), which will be key in terms of market expectations on ECB rates.
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