In an otherwise relatively quiet week in which the only upcoming US data is housing, current account and jobless claims, UK politics will again draw attention, one year (on Friday) after the Brexit referendum and as noted earlier, Brexit negotiations begin on Monday, despite lingering political uncertainty in the UK. Also no less than 9 FOMC members are scheduled to speak this week.
On Wednesday the Queen's Speech will mark the opening of parliament and outline the government's legislative program, despite no formal agreement between the Conservative Party and the DUP (at time of writing). Bank of England speakers will also get attention after last week's surprisingly hawkish BOE, particularly Governor Carney's re-scheduled Mansion House speech. Overall we could see a headline-heavy week, making for a volatile period ahead for GBP.
A quick snapshot of what to expect:
- A very light calendar in the US, with only housing data, current account
balance and the usual weekly jobless claims. We do hear from various
Fed speakers, including New York Fed President Dudley on Monday and Vice
Chair Fischer on Tuesday. - In Emerging Markets, there will be monetary policy meetings in Mexico, Hungary, the Philippines and Taiwan. We forecast Mexico's Banxico will hike the overnight rate by 25bp
- In the Eurozone, PMIs the main data release, while we also get the results of the second (final) round of Parliament elections in France, as well as an EU leaders Summit.
- In the UK, little on the data front other than public finances, leaving focus on the politics - Brexit negotiations and the Queen's speech. BOE speakers also on the schedule.
- In Japan, we have trade balance, and manufacturing PMIs but also two BoJ speakers, including Governor Kuroda speaking in Tokyo.
- In Canada, we get retail sales and CPI.
A breakdown of the key events in the week ahead courtesy of Deutsche Bank:
- Monday will be a a quiet start to the week today with no data of note in either Europe of the US. With respect to the latter, New York Fed President Dudley (voter) and Chicago Fed President Evans (voter) will be speaking today. The Brexit process officially begins today.
- Tomorrow, only Germany PPI and the US current account balance in Q1 due. Fed Vice Chair Fischer will be giving the keynote address at a conference on macroprudential policy in Amsterdam. The event is closed to the press, hence we may only get the text of his speech. In general, Fischer has been a bit more hawkish than other Committee members and is likely looking through the recent soft patch in core inflation. Boston Fed President Rosengren (non-voter) will also be speaking at the aforementioned conference. Recall that Rosengren has been voicing his concerns about credit risks in the commercial real estate sector for the past year and has been leaning more hawkish of late. Dallas Fed President Kaplan (voter) will be speaking in San Francisco later this afternoon. Our best guess is that he will stick to the script, characterizing the pause in inflation as likely transitory. Kaplan will also likely indicate that as long as the labor market remains on track, he will still support another rate hike this year along with tapering of reinvestments.
- On Wednesday, the early focus will be on the UK with May public sector net borrowing data due out. In the US we will get the first piece of economic data with May existing home sales (5.6 million forecast vs. 5.57 million previously). Although we expect sales to remain steady, recent mild weakness in pending home sales presents modest downside risk. In general, we remain positive on the housing outlook given sturdy consumer fundamentals and still low mortgage rates. Despite the fact that the Fed has hiked interest rates by 75 basis points (bps) over the past 12 months, 30-year mortgage rates have increased less than 20 bps from where they were this time last year.
- On Thursday, in France we’ll receive June confidence indicators while in the UK we’ll get CBI total orders data for June. In the US on Thursday the data includes initial jobless claims, Kansas City Fed’s manufacturing index, FHFA house price index and the conference board’s leading index. Fed Governor Powell's appearance on Thursday before the Senate Banking Committee could be the most important event of the week. In our view, Powell is a top contender for the next Fed Chair. The topic is "Fostering Economic Growth: Regulator Perspective". This is extremely relevant given the release last week of a set of proposals from the Treasury Department that were aimed at overhauling bank regulation. Note that swap spreads responded to the list of proposals, which would essentially eliminate Treasury securities as a binding constraint on bank balance sheets. Powell will be speaking again on Friday afternoon at a conference in Chicago on central clearing and liquidity.
- Finally on Friday, in Asia we’ll receive the flash June manufacturing PMI for Japan while in Europe we’ll get the flash PMIs for the Euro area, Germany and France. Also due out is the final revisions to Q1 GDP in France. Census will release May new home sales (625k vs. 569k). In addition, St. Louis Fed President Bullard and the Cleveland Fed's Mester, both non-voters this year, will be speaking on the economic outlook. They are on opposite ends of the monetary spectrum, and while the former raised his estimate of the funds rate in the latest dot plot, he is still the most dovish Fed policymaker. Mester, similar to Kaplan, will in all likelihood stick to the script.
Finally, here is a look at what to expect in the US, where the key economic releases this week are existing home sales on Wednesday and new home sales on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week. Goldman provides the commentary, and consensus expectations.
Monday, June 19
- 08:00 AM New York Fed President Dudley (FOMC voter) speaks: New York Federal Reserve President William Dudley will participate in a business roundtable meeting in Plattsburg, New York. There will be no prepared text.
- 07:00 PM Chicago Fed President Evans (FOMC voter) speaks: Chicago Federal Reserve President Charles Evans will give a speech on current economic conditions and monetary policy at the Money Marketeers of New York University event in New York City. Audience and media Q&A is expected.
Tuesday, June 20
- 03:15 AM Fed Vice Chair Fischer (FOMC voter) speaks: Federal Reserve Vice Chair Stanley Fischer will give the keynote speech at the DNB-Riksbank Macroprudential Conference Series in Amsterdam.
- 8:00 AM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Federal Reserve President Eric Rosengren will give a speech titled, “Bad Zero: Financial Stability in a Low Interest Rate Environment" at the DNB-Riksbank Macroprudential Conference Series in Amsterdam.
- 08:30 AM Current account balance, Q1 (consensus -$124.9bn, last -$112.4bn)
- 03:15 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Federal Reserve President Robert Kaplan will give a speech on current economic conditions and implications for monetary policy at the Commonwealth Club in San Francisco.
Wednesday, June 21
- 10:00 AM Existing home sales, May (GS -0.5%, consensus -0.4%, last -2.3%): We look for a modest 0.5% decline in May existing homes sales, following a 2.3% drop in the prior month. Regional housing data released so far suggest a moderate deterioration in closed homes sales. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.
Thursday, June 22
- 08:30 AM Initial jobless claims, week ended June 17 (GS 240k, consensus 240k, last 237k); Continuing jobless claims, week ended June 10 (consensus 1,930k, last 1,935k): We estimate initial jobless claims rose 3k to 240k in the week ended June 17. We see few notable outliers in the state-level data from last week. Continuing claims – the number of persons receiving benefits through standard programs – remain close to recent lows.
- 09:00 AM FHFA house price index, April (consensus +0.4%, last +0.6%): Consensus expects the FHFA house price index to rise 0.4% (mom sa) in April on top of a 0.6% gain in March. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller home price index, but is based only on properties financed with conforming mortgages. On a year-over-year basis, FHFA home prices rose 6.2% in March.
- 10:00 AM Fed Governor Powell (FOMC voter) speaks: Federal Reserve Governor Jerome Powell will give a testimony on “Fostering Economic Growth: Regulator Perspective” in front of the Senate Banking, Housing and Urban Affairs Committee in Washington D.C.
- 11:00 AM Kansas City Fed manufacturing index, June (last +8).
Friday, June 23
- 09:45 AM Markit Flash US manufacturing PMI, June preliminary (consensus 52.6, last 52.5)
- 09:45 AM Markit Flash US services PMI, June preliminary (consensus 53.7, last 54.0)
- 10:00 AM New home sales, May (GS +5.5%, consensus +5.4%, last -11.4%): We estimate new home sales rebounded 5.5% in May following an outsized 11.4% decline in April. In the April report, new home sales were abnormally weak in the West, and we expect some retracement in May.
- 11:15 AM Atlanta Fed President Bullard (FOMC non-voter) speaks: Atlanta Federal Reserve President James Bullard will give a speech on the U.S. economy and monetary policy at the Illinois Bankers Association Annual Conference in Nashville, Tennessee.
- 12:40 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will give the keynote speech at the Cleveland Fed’s Policy Summit on Housing, Human Capital and Inequality in Ohio. Audience and media Q&A is expected.
- 02:15 PM Fed Governor Powell (FOMC voter) speaks: Federal Reserve Governor Jerome Powell will give a speech on “Central Clearing and Liquidity” at the Federal Reserve Bank of Chicago. Audience Q&A is expected.
Source: GS, BofA, DB