MARKET INSIGHT: What to watch
Jul-20 06:36
- This morning we have already seen UK inflation data released, with core CPI in line with expectations and headline CPI a tenth higher than expected. The MNI Markets team thinks that combined with Bailey's speech yesterday and other recent data that the probability of a 50bp hike in August has now increased to around 70% (from the 60% we pencilled in following the June MPC meeting), but markets had been pricing in an even higher probability going into the release.
- In Italy, Draghi will deliver an address to the Upper House at 8:30BST / 9:30CET this morning ahead of a confidence vote with Draghi having reiterated recently that he needs the support of Five Star to continue in office.
- In UK politics we are due to have the final round of voting for MPs in the Conservative party leadership content. Sunak is likely to make the run-off, having fallen just 2 votes short of qualifying in yesterday's vote. However, there are the 59 votes that Badenoch received up for grabs today and with Mordaunt only six votes ahead of Truss, either candidate could realistically get through to the membership runoff. Voting is likely to take place 13:00-15:00BST with results around 16:00BST.
- In terms of data today we will receive Canadian inflation at 13:30BST and US exiting home sales data at 15:00BST.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
BUNDS: Focus on speakers
Jun-20 06:27
- A quieter session for Govies and Bund, with the US out.
- Still, the contract jumped 35 ticks on the German PPI, but the latter was unlikely the driver since it came pretty much in line versus last, a 2 Tenth miss for the YoY and 1 tenth beat for the MoM.
- More likely to have been a market order, with just 1k lot traded on the whole move, and Bund reversing the jump.
- There are no tier 1 data for the session.
- SPEAKERS; Focus will be on speakers, which today include, ECB Muller, Visco, Centeno, Lagarde, Kazaks, Lane, BoE Haskel, Mann, Fed Bullard.
UK: Week Ahead (1/2)
Jun-20 06:18
- Last week saw some big volatility in UK rates markets (although relative to the moves seen in US and European markets last week, sterling markets were relatively stable!) The most important domestic event was the change in language from the Bank of England, removing explicit time-dependent forward guidance and replacing it with language that leaves the door open to hikes of a different scale – opening the door to 50bp from the wider MPC. Market pricing in the aftermath of the meeting moved to price around 60bp for August (i.e. fully pricing a 50bp hike with a 40% probability of August), but as we argue in the MNI BOE Review, we think the real probability should be closer to 25bp being fully priced with a 60% probability of a 50bp hike.
- There are three main data points that we think will be absolutely pivotal: the two inflation prints and the next labour market data release. The first of these comes this week on Wednesday with the release of May CPI data. Economists are generally split between 9.0-9.2%Y/Y for headline (from 9.0% in April) while core is expected to come in anywhere between 5.9-6.3%Y/Y in an unusually large range. This was 6.2%Y/Y in April, so 13/23 economists in the Bloomberg survey expect a lower core CPI print in May than April.
UK: Week Ahead (2/2)
Jun-20 06:17
- In addition to inflation data on Wednesday, the week ahead also sees the release of retail sales data on Friday. This will give us the best picture yet of the state of the consumer in May, but is unlikely to really make a huge difference in isolation to the MPC’s views of tightening.
- The week ahead will see scheduled appearances from the MPC’s Haskel and Mann today. Haskel will be speaking at a TechUK Policy Leadership Conference so it is questionable whether he will be answering any questions on monetary policy. Catherine Mann is due to appear in an MNI Connect webinar. There is a link to register here in what should be a very interesting event. Note that Mann is one of the more hawkish members of the MPC having consistently been among the members voting for a 50bp hike.
- Pill is due to speak tomorrow and on Friday (but he spoke on Friday last week so again it is unlikely if he will say anything new at either event). Cunliffe is due to speak on cryptocurrencies on Wednesday (and probably won’t address monpol in a meaningful way) while Haskel is due to speak on Friday at Chatham House on the global economic system. His comments are likely to be interesting too, in our view.
Related bullets
Related by topic
Political Risk Bullets
Global Macro Analysis
Political Risk Coverage
FI Bullets
Homepage Section
FX Bullets
