EN Down
Hi, user_no_name
Live Chat

It’s a busy week for central banks this week. Firstly, we start with the FOMC’s meeting minutes from its June policy talks. Tapering was on the agenda, whilst policymakers started to pull forward when they think rates should rise, so getting beneath their skin is critical for understanding market movement.

The Reserve Bank of Australia shares its latest update too as rising Covid cases and lockdowns kick in. Will this inspire a policy rethink?

The impact of the delta variant on Eurozone recovery will be in focus too as the EU shares its latest economic outlook.

FOMC meeting minutes are the week’s big release, coming on Wednesday.  

It will be interesting to see in the Fed’s internal discussions after June’s meeting. Then, the Fed signalled it won’t let inflation run hot and that a rate hike may be coming a little earlier than anticipated. 

The Fed’s median projection showed they see lifting their benchmark rate to 0.6% from near zero by the end of 2023. In March, it was expected that rates would hold steady across that year. 

Tapering was also on the agenda. We know Chairman Powell et al discussed an eventual reduction in the Fed’s bond buying programme, but, in the post-meeting statement, no indicators towards when this might occur were given.  

The Fed is still making around $120bn in purchases every month as part of its overall Covid economy strategy.  

A window into any central bank’s thinking is essential for market observers. Investors are having to recalibrate their high-inflation bets in response to the Fed’s hawkish June tilt.  

What we’re seeing now is a US economy in a transitionary phase. No economy, no matter how large, can afford to simply ride the waves. It has to be responsive. The Fed has done that, but it will be interesting to see inside the Fed at this crucial juncture. 

Keeping with central banks, the Reserve Bank of Australia speaks on Wednesday. Covid-19, in a country that largely appeared to have it under control, is starting to bite once more. The delta variant has begun its spread throughout Australia. A new wave of lockdowns is in place. 

Roughly 80% of Australia’s population is back under stay-at-home orders or restricted movement. 

Could this prompt a change in RBA thinking ahead of its July 6th meeting? Governor Lowe and his team are already in a dovish economic stance. Rates have not shifted from their historic 0.10% level since November. 

Speaking after last month’s meeting, Governor Lowe said: “The economic recovery in Australia is stronger than earlier expected and is forecast to continue. The bank’s central scenario is for GDP to grow by 4.75% over this year and 3.5% over 2022. This outlook is supported by fiscal measures and very accommodative financial conditions.”  

Of course, that statement was made when the road to recovery hadn’t been blocked. The RBA will need to act with clarity and precision to ensure it can keep Australia’s economy on the right track. We’ll learn more when the RBA speaks on Wednesday. 

EU economic forecasts are coming this week, too.  

The bloc appears to be coming out of the worst of the pandemic relatively strongly. We’ve seen strong PMI numbers and GDP forecasts are strong too. We’ve also seen some European Central Bank members suggest pulling back of the PEPP stimulus package could be on the cards. 

Regarding PEPP, ECB council member and Deutsche Bundesbank President Jens Weidmann has suggested the programme could be wound up prior to the original March 2022 deadline. The ECB will have pumped €2.2 trillion into the Eurozone economy through its PEPP programme by then. However, to change this would require strong economic recovery and complete removal of Covid-caused restrictions. 

With the delta variant beginning to bite, full removal of restrictions seems unlikely. In fact, how the EU responds to the new wave of cases will be crucial. Will it have to retool thinking and economic forecasts in response? 

Still, the analysts’ outlook is broadly positive. S&P Global, for instance, has made a few tweaks. 

“We revised upward our forecast for eurozone growth to 4.4% this year and 4.5% in 2022, seeing broader implementation of fiscal stimulus under the Next Generation EU plan and weaker contraction of GDP in the first quarter,” the ratings house said. 

“Long-term scarring to the economy is likely to be limited by Europe’s coordinated fiscal and monetary policy response, paving the way for the output gap to close by 2024.” 

Major economic data 

Date  Time (GMT+1)  Asset  Event 
Mon 05-Jul  3.30pm  CAD  BOC Business Outlook Survey 
Tue 06-Jul  5.30am  AUD  RBA Rate Statement 
  5.30am  AUD  Cash Rate 
  10.00am  EUR  EU Economic Forecasts 
  10.00am  EUR  ZEW Economic Sentiment 
  10.00am  EUR  German ZEW Economic Sentiment 
  3.00pm  USD  ISM Services PMI 
Wed 07-Jul  3.00pm  CAD  IVEY PMI 
  3.00pm  USD  JOLTS Job Openings 
  7.00pm  USD  FOMC Meeting Minutes 
Thu 08-Jul  2.30am  AUD  Retail Sales m/m 
  1.30pm  USD  Unemployment Claims 
  3.30pm  GAS  US Natural Gas Inventories 
  4.00pm  OIL  US Crude Oil Inventories 
Fri 09-Jul  1.30pm  CAD  Employment Change 
  1.30pm  CAD  Unemployment Rate 


Key earnings data 

Date  Company  Event 
Tue 06-Jul  Ocadao Group  Q2 2021 Earnings 
Wed 07-Jul  Aeon  Q1 2021 Earnings 
Thu 08-Jul  Levi’s  Q2 2021 Earnings 
Fri 09-Jul  Tryg  Q2 2021 Earnings 

Latest news

Gold price approaches record high on Wednesday amid Middle East concerns

Tuesday, 16 April 2024


Gold price rises on Middle East tensions, dollar drop

UK inflation declined less-than-expected in March, coming in at 3.2%

Tuesday, 16 April 2024


UK inflation declines in March — less is more?

Aluminium and nickel prices spike after new Russia sanctions imposed

Monday, 15 April 2024


Aluminium, nickel prices spike on fresh Russia sanctions

Markets on Tuesday saw rising Treasury yields and a strong USD coupled with weaker stocks

Monday, 15 April 2024


Stocks struggle, VIX jumps amid strong USD, Treasury yields

Live Chat