SWEDEN: June CPI Preview – Services Expected To Reverse May Acceleration
Swedish June inflation is due at 0700BST/0800CET, and is one of two inflation prints before the Riksbank’s August 20 meeting, where a 25bps cut is expected.
- We think that any upside surprise to June CPIF ex-energy inflation will need to be taken alongside the July inflation data (due August 14) before meaningfully altering market expectations for an August cut.
- Both the Bloomberg consensus and Riksbank’s June MPR expect CPIF ex-energy at 2.5% Y/Y, more-than reversing May’s acceleration to 3.0% Y/Y (vs 2.9% in April).
- A reversal of May’s rise in services inflation is expected in June. Part of the acceleration in May was due to one-off events like Taylor Swift concerts and Eurovision.
- There are mixed views on the expected contribution of food prices. A reminder that food inflation was higher-than-expected in the Norwegian June inflation print.
- Headline CPIF is seen at 1.6% Y/Y (Riksbank 1.5%, May 2.3%), primarily due to energy base effects.
- See below for a selection of analyst views:
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UK DATA: UK Activity Data Due at 7:00 BST
- UK activity data, including monthly GDP and it's components for April, are due for release at 7:00BST.
- Looking at the monthly print, the Bloomberg median is -0.1% M/M for April with estimates ranging from -0.3% to +0.2%, following March's higher than expected print of +0.4% M/M.
- In regards to the main subcomponents (Services, Industrial Production, Construction) - consensus looks for both Services and Industrial Production to come in at -0.1% M/M. Construction output is expected to remain flat on the month after last month's 0.4% M/M contraction, although construction PMI increased to 53 in April.
- The services M/M forecast has estimates ranging from -0.4% to 0.1%. In contrast, analyst expectations for IP are skewed downwards with estimates ranging from -0.4% to 0.3%, likely to be affected by bad weather.
- In terms of market reaction we expect a relatively muted reaction (particularly compared to either inflation or labour market data). Today's data, even with a large surprise, is unlikely to be the catalyst for any MPC member to decide whether to change their vote at the June MPC meeting, although tepid growth will be in-line with the bank's quarterly staff projection of +0.24% for Q2.
EURJPY TECHS: Trendline Support Remains Intact
- RES 4: 172.97 2.0% 10-dma envelope
- RES 3: 172.00 Round number resistance
- RES 2: 171.56 High Apr 29 and the bull trigger
- RES 1: 170.89 High Jun 3
- PRICE: 168.94 @ 06:45 BST Jun 12
- SUP 1: 168.09 Low Jun 4
- SUP 2: 167.70 Trendline support drawn from the Dec 7 ‘23 low
- SUP 3: 165.64 Low May 7
- SUP 4: 164.02 Low May 3 and a pivot support
The latest pullback in EURJPY is considered corrective and the primary trend structure remains bullish. Sights are on 171.56, the Apr 29 high and a key resistance where a break would confirm a resumption of the uptrend. Support to watch is at a key trendline drawn from the Dec 7 ‘23 low, at 167.70. A clear breach of this line would highlight a potential reversal. Note this would also confirm a break of the 50-day EMA, at 167.52.
EUROZONE ISSUANCE: EGB Supply
The EU held a syndication while the Netherlands and Finland held conventional auctions yesterday. Germany and Italy both still look to hold auctions this week. We pencil in estimated gross issuance for the week at E22.2bln, down from E31.3bln last week.
- Today Germany, will look to sell E4bln of the 2.20% Feb-34 Bund (ISIN: DE000BU2Z023).
- Italy will conclude the week tomorrow by holding a 3/7/15/25-year BTP auction. On offer will be E3.5-4.0bln of the new 3-year 3.45% Jul-27 BTP (ISIN: IT0005599904), E2.0-2.5bln of the 3.45% Jul-31 BTP (ISIN: IT0005595803), E1.0-1.25bln of the 4.15% Oct-39 BTP (ISIN: IT0005582421) and E1.0-1.25bln of the 3.85% Sep-49 BTP (ISIN: IT0005363111).
