Central Banks Set to Make Key Decisions as Market Focus Shifts

Central Banks are at the forefront as global financial markets brace for pivotal policy announcements. Investors are keenly anticipating significant decisions from these institutions across the U.S., Europe, and Asia.

U.S.: Federal Reserve Eyes September Rate Cuts

The U.S. Federal Reserve is expected to maintain the Federal Funds target range at 5.25%-5.50% in its upcoming meeting on Wednesday. Many market observers speculate that the Fed might signal a rate cut as early as September. Analysts from TD suggest that while Chair Jerome Powell might not explicitly commit to a September reduction, he will likely hint that the Fed is nearing a decision.

Volker Schmidt from Ethenea indicates that although the possibility of a rate cut next week is slim, the Fed is likely to await further evidence of slowing inflation. Markets predict only a minimal chance of a rate cut in July, but many expect a reduction in September.

Attention will also be on the U.S. labor market, with crucial data releases including the July nonfarm payrolls, JOLTS job openings, and ADP private payroll figures. The Treasury will auction $76 billion in 13-week and $70 billion in 26-week bills, with $70 billion in 42-day bills on Tuesday.

The Fed will likely keep rates steady but hint at a possible September cut if inflation slows, according to Barron’s Print Edition.

Canada: GDP Data Under Scrutiny

Canada will release its monthly GDP data for May on Wednesday. This follows several interest rate cuts by the Bank of Canada. The figures will reveal if more rate reductions are needed due to economic uncertainty.

Eurozone: Inflation and GDP Figures Awaited

In the Eurozone, analysts will closely watch the preliminary inflation figures for July and the second-quarter GDP estimate. Following recent surveys indicating a stalling economic recovery, a decrease in the inflation rate from 2.5% to 2.3% could support calls for further rate cuts by the European Central Bank. Analysts expect the second-quarter GDP to be weaker compared to the first quarter.

Throughout the week, we will release business and consumer surveys for July, along with final manufacturing purchasing managers’ surveys.

U.K.: Bank of England Decision on the Horizon

The Bank of England will announce its decision on interest rates on Thursday, with expectations of a close call between a 25 basis point cut or maintaining the current rate of 5.25%. Despite a drop in annual headline inflation to 2.0%, concerns over wage and service-price inflation persist. Barclays economists predict a 5-4 vote in favor of a rate cut, while others anticipate a dovish shift in forward guidance.

Economic data for the U.K. will include mortgage and consumer credit figures, the CBI’s retail sales survey, and the British Retail Consortium’s shop price index. The U.K. Debt Management Office also plans to sell the July 2034 gilt.

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Japan: Bank of Japan’s Policy Meeting

The Bank of Japan’s meeting on Tuesday and Wednesday will attract close attention. Speculation surrounds whether the central bank will raise its policy rate. Recent yen strength may cause the BOJ to pause hikes, despite some officials pushing for tighter policy. The BOJ is also expected to outline its plans to reduce purchases of Japanese government bonds.

Japan will release labor market data, retail sales, and industrial production figures, with Capital Economics anticipating a significant decline in industrial output for June.

Australia & New Zealand: Key Data Ahead

Australia’s bond market faces a crucial week with second-quarter inflation data set for release on Wednesday. Persistent inflation could lead the Reserve Bank of Australia to consider another rate hike. On Tuesday, Australia will publish data on retail sales and building approvals.

China: PMI Data in Focus

China’s official PMI data for July will be a key focus as traders look for signs of economic improvement. Recent policy measures from Beijing have been noted, but their effectiveness remains under scrutiny. If demand weakness persists, it may dampen economic optimism.

Taiwan and Hong Kong: Economic Performance Updates

On Wednesday, we will release advance estimates for the economic performance of Taiwan and Hong Kong in the second quarter. Analysts forecast a slowdown in growth for both regions. This anticipated deceleration reflects various economic factors and could significantly impact the broader regional economy.

South Korea: Economic Releases and Trade Data

Throughout the week, South Korea will release key economic data, including figures on industrial production, trade, and inflation. Analysts anticipate a notable rise in export growth for July, driven by a rebound in the technology sector. We expect this uptick to reflect the ongoing recovery in the tech cycle, which has significantly influenced South Korea’s economic performance. The data will offer important insights into the health of the South Korean economy and its prospects for continued growth.

Singapore: Manufacturing and Employment Data

Singapore will release its July manufacturing activity gauge and second-quarter employment data. Analysts expect the manufacturing sector to continue its recovery.

As these global economic indicators and central bank decisions unfold, market participants will be closely watching for signals of future policy directions and their potential impacts on the global economy.

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