- US, India and Sweden CPI top data schedule as UK RICS survey digested;
Trump UK visit, Euro group meeting and ECB minutes also in the
spotlight; Italy (multi-tranche) and US (30yr) to auction debt
- US CPI: headline seen posting 6 1/2 yr high in headline terms, core
also expected to tick up to 18-month high; core pressures in focus
after higher than expected PPI
- Sweden CPI: further uptick expected, but will need to sustain through
Q3 to prompt change of heart from Riksbank dovish majority
- India CPI: energy prices and weak INR likely to push headline to 2-yr
high
- Charts: GSCI Metals Index, USD/TRY, USD/INR and EUR/SEK
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** EVENTS PREVIEW **
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The schedule of data and events is relatively plentiful with US and Swedish CPI topping the statistical agenda, which also has the UK RICS House Price survey (better than expected at +2 vs, rev. prior -2) to digest ahead of CPI and Industrial Production in India. In event terms, Trump's visit to the UK will doubtless offer controversy as the world's self-styled 'disrupter in chief' does an excellent impression of a bull in a china shop, offering point lessons in how to alienate allies and friends. For an analysis of Germany's actual energy sourcing and usage, I would refer to the team at CleanEnegyWire's article here:
https://www.cleanenergywire.org/news/trump-lashes-out-german-russian-gas-trade . Rather less controversial will be the Euro Group meeting and the "account" (minutes) of the June ECB meeting, with the BoE's Credit Conditions & Bank Liabilities Survey and Fed speak also on hand. Govt bond supply takes the shape of 3, 7, 15 & 20-yr Italian BTPs and the final leg of this week's auctions with $14 Bln of 30-yr T-Bonds. Swedish CPI is expected to see a 0.3% m/m rise on headline and the core CPIF measures that implies a 0.2 ppt rise in the y/y rates to 2.1% and 2.3% respectively, which does serve to open the door a little further to a Riksbank hike, though with only 2 dissenters on the policy committee, CPI will have to sustain these y/y levels for at least the duration of Q3 to genuinely open the door to a Q4 rate hike; yesterday's Prospera Inflation expectations survey imply few signs of any significant pick-up in medium-term inflation expectations. The ECB minutes will be of interesting given the various 'sources' stories over the past 10 days suggesting considerable divergence of council member opinion on what it is meant by 'no sooner than the summer of 2019' for an initial rate hike, with a number of members objecting to a pre-commitment to no rate hike for a year, both given the rise in inflation and both upside and downside risks to the growth outlook. Ailing metals markets and the continued and persistent weakness of the Turkish Lira provide other ongoing points of interest (see charts attached), while the Indian CPI requires particular attention given that oil prices and a weak INR are expected to pressure CPI to 5.29% y/y, the highest level since July 2016, and well above the RBI's 4.0% target - a rate hike before Q4 looks to be increasingly inevitable, above all if the key 69.00 leaves the USD were to break.
** U.S.A. - June CPI **
- While drawing a line across from PPI to CPI has become ever more tenuous in recent years, the uniform above expectations 0.3% m/m rise in PPI, despite plenty of Food (-1.1% m/m) and Energy (+0.8% m/m) 'noise' is perhaps instructive in terms of emergent pressures. The consensus for CPI is for the usual 0.2% m/m, which would see the y/y headline tick up to a 6 1/2 yr high of 2.9%, while core CPI would edge up to 2.3% y/y matching January 2017's recent high. In the detail, outside of energy and food (both perhaps exercising a slight downward pull), the swing variables to watch will be OER (housing, which has been running at high 0.3% m/m rates for the past 3 months) and Medical Care (last: 0.3% and 0.2% m/m respectively), and the increasingly volatile Apparel category, and perhaps Education / Communication which posted an uncharacteristic 0.4% m/m spike in May. Initial Claims are seen dipping to 225K from the previous week's mini spike to 231K, but as this is data for the 4th July week, an outlier reading is possible.
from Marc Ostwald
