Highlights
After market gyrations in summer market conditions, market participants will look for further clues to how US inflation is easing in Wednesday's CPI data and whether the economy can sustain the current restrictive monetary conditions in Thursday's retail sales data with an inter-meeting rate cut by the Federal Reserve.
The Reserve Bank of New Zealand is expected to leave its official cash rate at 5.50 percent for a ninth straight meeting on Wednesday as consumer inflation stands at 3.3 percent, which is still above the RBNZ's target range of 1.0 percent to 3.0 percent.
There were signs of overbought dollar positions, some of which were unwound on softer US economic data, which has helped the Canadian dollar even after the Bank of Canada's second consecutive rate cut in July. The yen has regained much of its lost ground against the dollar this year in light of talk of a Fed rate cut in September and despite sluggish consumer spending.
Both Governor Kazuo Ueda and Shinichi Uchida, his deputy who has been behind the bank's large-scale easing and its policy normalization process, are saying what is obvious to the central bank but might have sounded fresh to some members of the public and markets. The governor told reporters on July 31 that a gradual pace of rate hikes at an early stage is better than jacking up interest rates later when upside risks to inflation materialize, and that BoJ policymakers don't consider 0.5% a ceiling for the policy rate, which is still far below the zone that can be regarded as neutral to economic activity (one board member believes the terminal rate is 1 percent at the lowest).
In an Aug. 7 speech, Uchida sought to calm the jittery investors by saying rate hikes in Japan are different in nature compared to those in Europe and North America. Japan's economy is not in a situation where the bank may fall behind the curve if it does not raise the policy interest rate at a certain pace, he said. Therefore, the bank will not raise its policy interest rate when financial and capital markets are unstable.
On Monday, Japanese markets are closed for the Mountain Day public holiday. Trading is expected to be choppy with high volatility as many Japanese take O-bon holidays for the week.
India's annual consumer inflation rate is forecast to have moderated substantially to 3.70 percent in July from 5.08 percent in June, thanks to the favourable base effect following a spike seen a year earlier. That would set the rate below the Reserve Bank of India's 4.0 percent medium-term target and may prompt more dovish voices among the RBI's policymakers.
The year-over-year increase in Indian industrial production is expected to slow to 5.5 percent in July after surging to a 5.9 percent gain in June from May's 5.0 percent growth.
Producer inflation in Japan is expected to stay on a gradual uptrend, rising to 3.0 percent in July in light of higher global energy markets and elevated import costs amid the weaker yen, after accelerating to 2.9 percent in June from 2.4 percent in May and 0.9 percent in April. It would remain the highest increase since the 3.4 percent rise in August 2023. The government raised the renewable energy charge for fiscal 2024 in April. It also ended its subsidies for electricity and natural gas in June, which were reflected in July bills. The impact of these measures is partly offset by softer non-ferrous metal prices amid concerns over Chinese slowdown.
In Australia, the seasonally adjusted wage price index is forecast to rise 0.9 percent on quarter in the April-June period after rising a below-forecast 0.8 percent in January-March and 0.9 percent in October-December. The year-over-year rate of wage growth is seen easing slightly to 4.0 percent in the second quarter from a lower-than-expected 4.1 percent in the first quarter, when it slowed from 4.2 percent previously. Last week, the Reserve Bank of Australia left its policy rate unchanged at 4.35 percent for a sixth straight meeting after raising it by 25 basis points to the current level in November 2023.
The Reserve Bank of New Zealand is expected to leave its official cash rate at 5.50 percent for a ninth straight meeting on Wednesday as consumer inflation stands at 3.3 percent, which is still above the RBNZ's target range of 1.0 percent to 3.0 percent.
There were signs of overbought dollar positions, some of which were unwound on softer US economic data, which has helped the Canadian dollar even after the Bank of Canada's second consecutive rate cut in July. The yen has regained much of its lost ground against the dollar this year in light of talk of a Fed rate cut in September and despite sluggish consumer spending.
Both Governor Kazuo Ueda and Shinichi Uchida, his deputy who has been behind the bank's large-scale easing and its policy normalization process, are saying what is obvious to the central bank but might have sounded fresh to some members of the public and markets. The governor told reporters on July 31 that a gradual pace of rate hikes at an early stage is better than jacking up interest rates later when upside risks to inflation materialize, and that BoJ policymakers don't consider 0.5% a ceiling for the policy rate, which is still far below the zone that can be regarded as neutral to economic activity (one board member believes the terminal rate is 1 percent at the lowest).
In an Aug. 7 speech, Uchida sought to calm the jittery investors by saying rate hikes in Japan are different in nature compared to those in Europe and North America. Japan's economy is not in a situation where the bank may fall behind the curve if it does not raise the policy interest rate at a certain pace, he said. Therefore, the bank will not raise its policy interest rate when financial and capital markets are unstable.
On Monday, Japanese markets are closed for the Mountain Day public holiday. Trading is expected to be choppy with high volatility as many Japanese take O-bon holidays for the week.
India's annual consumer inflation rate is forecast to have moderated substantially to 3.70 percent in July from 5.08 percent in June, thanks to the favourable base effect following a spike seen a year earlier. That would set the rate below the Reserve Bank of India's 4.0 percent medium-term target and may prompt more dovish voices among the RBI's policymakers.
The year-over-year increase in Indian industrial production is expected to slow to 5.5 percent in July after surging to a 5.9 percent gain in June from May's 5.0 percent growth.
Producer inflation in Japan is expected to stay on a gradual uptrend, rising to 3.0 percent in July in light of higher global energy markets and elevated import costs amid the weaker yen, after accelerating to 2.9 percent in June from 2.4 percent in May and 0.9 percent in April. It would remain the highest increase since the 3.4 percent rise in August 2023. The government raised the renewable energy charge for fiscal 2024 in April. It also ended its subsidies for electricity and natural gas in June, which were reflected in July bills. The impact of these measures is partly offset by softer non-ferrous metal prices amid concerns over Chinese slowdown.
In Australia, the seasonally adjusted wage price index is forecast to rise 0.9 percent on quarter in the April-June period after rising a below-forecast 0.8 percent in January-March and 0.9 percent in October-December. The year-over-year rate of wage growth is seen easing slightly to 4.0 percent in the second quarter from a lower-than-expected 4.1 percent in the first quarter, when it slowed from 4.2 percent previously. Last week, the Reserve Bank of Australia left its policy rate unchanged at 4.35 percent for a sixth straight meeting after raising it by 25 basis points to the current level in November 2023.
Definition
Market Focus details key factors in the coming day that will impact the economic outlook and the financial markets. These include central bank events, economic indicators, policymaker speeches as well as expected political and corporate developments.
Description
Keeping up-to-date with event schedules and the economic calendar is key to understanding the global financial system. Econoday's Market Focus allows investors and policymakers to carefully track what will be making news and moving the financial markets in the coming day.
