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The outlook for global inflation is front and centre this week with CPI and PPI reports from China and the US likely to be the key drivers for macro sentiment. Some disinflation is taking hold and investors will be keen to see further progress as rate hikes bite. Meanwhile the central banks of Canada and New Zealand decide on interest rates and the Bank of England’s governor Andrew Bailey will speak twice.


Here are the week’s key events:


Chinese inflation data will set the tone. China’s producer price index fell 4.6% in May, the sharpest drop in seven years. The PPI is seen as an important leading indicator for global consumer inflation. CPI fell 0.2% month-on-month as demand in the world’s second largest economy remains sluggish. Lending data for China will also be released. In Europe the Sentix investor confidence survey is released.



UK is of interest with the latest jobless count and BRC retail sales monitor. Signs that a flatlining economy is taking its toll on the labour market emerged last month as figures showed unemployment rising to 3.9% from 3.8%, whilst the total number of workers on payrolls fell for the first time in two years.



The Reserve Bank of New Zealand hiked rates by 25bps in May but signalled it was the end of the cycle for now. The central bank lifted rates to a 14-year high 5.50%, but the RBNZ left official cash rate forecast unchanged, suggesting it thinks there will be no more hikes. July’s meeting is the first since then and will offer a glimpse of how the central bank thinks it will move next. Meanwhile the Bank of Canada may opt to raise rates for a second straight month after resuming hikes at its June meeting following a lengthy pause. The key macro data is the US June CPI inflation report, following by a 10yr Treasury auction to test the appetite of bond investors. Disinflation is evident in the headline number, dipping from 4.9% to 4.0% in May, but core inflation remains too elevated at 5.3%.



Inflation remains in focus with the US PPI report for June. The previous report showed inflation slipping by 0.3% in May, up 1.1% year-on-year – the slowest annual increase since 2020. However, the underlying trend may not be so encouraging for the Fed - the decline in wholesale prices was largely down to a 14% decline in gasoline prices. Minutes from the last FOMC meeting indicate members think a couple more hikes are warranted but markets still don’t think they will tighten that much – this week’s inflation double-bill will be important for moving the needle on Fed funds futures pricing.



The week finishes with Bastille Day in France and some trade data from the Eurozone. The main focus will be on the University of Michigan consumer sentiment and inflation expectations data. Consumers appear in a much better mood: in June the year-ahead economic outlook soared 28% over the prior month, and long-run expectations rose 11%. Overall, the UoM said that this upswing “reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation”. Meanwhile year-ahead inflation expectations receded for the second consecutive month, falling to 3.3% in June from 4.2% in May, the lowest since March 2021.

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