** EVENTS PREVIEW **
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A busier day is in prospect in terms of the scheduled calendar. The UK leads the statistical schedule with the gamut of inflation readings (CPI, RPI, PPI, ONS House Prices), with the German ZEW survey and US Housing Starts providing the accompaniment. On the policy side of the schedule, the ECJ's ruling on the legality of Slovenia's bank bail-out will be very closely watched, above all in the context of the implications for the attempts to recapitalize Italy's banks. The ECB's quarterly bank lending survey will as ever be judged in terms of the efficacy of the ECB's package of policy easing measures, though perhaps the more salient point is what it says recent and prospective demand for credit, which is by no means wholly contingent on the efficacy of the ECB's policy parameters. As the AKP's brutal, some might say Stalinist, purge of the purported supporters of the failed Turkish coup continues, the central bank (TCMB) meets to decide on monetary policy, having already announced at the week that it will provide "unlimited liquidity" to its banking sector, when and if needed, which according to the local banking association has not been called upon. The consensus (survey prior to Friday) had looked for a further narrowing of the TCMB's rate corridor via another 50 bps cut in the Overnight Lending Rate; this has now been reduced to just a 25 bps rate cut to 8.75%, presumably premised on the TRY's tumble, and the already elevated and 'sticky' level of inflation. But with Erdogan and his AKP govt troop on the authoritarian fast track to government via diktat, the already enormous pressure on the TCMB to ease will only intensify. The IMF will also be publishing an update on its global economic forecasts, which it has already signalled will be revised down (previously it forecast 2016 global GDP at 3.2% y/y). As much as its forecasting record is poor, and its revisions very reactive, rather than proactive, this will inevitably garner a deluge of 'expert' comment and media column inches and airtime, which will amount to the proverbial 'full of sound and fury, signifying nothing'. As for the ZEW survey, this is expected to reverse most of June's rather than stronger than expected gains - Current Situation seen at 51.8 from 54.5, Expectations seen at 9.0 vs. 19.2. This is despite the solid net gain in the DAX relative to the prior survey period, with which the Expectations index is normally well correlated, and probably predicated on the combination of rather mixed domestic data and the Brexit referendum 'shock'; given the volatility of markets, the probability of a surprise outturn looks to be quite high.
** U.K. - June CPI, PPI **
- As has often been witnessed, June CPI and RPI reports can frequently deliver surprise readings, primarily due to data collection timing effects related to the start of the summer sales season, as was most recently witnessed in June 2014, and at time very badly misread by the Bank of England's MPC. The consensus looks for a 0.2% m/m rise in both CPI and RPI, which would see a marginal uptick in y/y rates to 0.4% and 1.5% respectively. Petrol prices are likely to continue to exercise some upward pressure, while the anecdotal evidence from the BRC Shop Price survey suggests some pressure from healthcare products, with food prices neutral, while clothing will continue to push down on prices, and summer discounting will see falls in Furniture and Electrical goods; as ever Airfares/Holidays will be a potential wild card. It will however be a few months before the impact of the GBP fall will show up, and as such today's report will be of rather less significance. By contrast, PPI Input prices are likely to see some currency, energy and commodity price impact, with a 1.1% m/m rise expected, which would see a sharp unwind of prior falls in y/y terms to juts -0.8% y/y from May's -3.9%. The input pressures are however only expected to see a modest rise in Output Price terms, where the headline reading is forecast to by just 0.2% m/m for a y/y reading of -0.5%, which compares with May's 0.1% /-0.7%. ONS House Prices are also due, but are for May, and per se are now rather historical.
from Marc Ostwald
