Stay Alert In The Coming Week
LONDON, July 21 (Reuters) - Key U.S. growth data next week
will be the highlight of a fairly busy data calendar and is
expected to support the recently softened view on inflation and
growth taken by U.S. Federal Reserve chief Ben Bernanke.
In Europe, the focus will be on Germany's Ifo business
confidence numbers, with markets looking for evidence to back up
expectations for the European Central Bank to raise interest
rates beyond the current 2.75 percent next month.
Japanese consumer price index and trade balance numbers are
also due, following the Bank of Japan's decision to raise
interest rates for the first time in six years earlier this
month.
The U.S. central bank chief dampened feverish expectation
for further U.S. rates hikes from the current 5.25 percent with
congressional testimony earlier this week, saying U.S. inflation
was likely to ease.
Bernanke said he expected core inflation, which excludes
food and energy costs, to fall in coming quarters as the economy
slows, echoing what the Fed suggested after it last boosted
rates: that slowing growth would take the steam out of
inflation.
"During periods when the Fed has produced a relatively
dovish statement, the dollar has gone down, and investors have
sought out other markets and generally pursued higher risk,"
Bank of New York currency strategist Neil Mellor said.
"If we continue to see relatively weaker data we might start
to see a resumption in spending on high-yield markets in the Far
East and emerging markets. That does assume that the events in
the Middle East don't affect investor confidence," he added.
U.S. consumer confidence data on Tuesday and key second
quarter gross domestic product numbers on Friday are both seen
backing up the softer Fed stance.
July consumer confidence is seen falling to 104.7 from 105.7
in June, according to a Reuters forecast, while advance second
quarter GDP figures are expected to show that growth eased to
3.0 percent in the second quarter from 5.6 percent previously.
One fly in Bernanke's moderating growth ointment could be
Tuesday's existing home sales data. Sales were expected to total
6.6 million.
"Housing data will be worth watching as the Fed has made
clear it believes the housing market is one of the major drivers
of consumer spending. The May housing figures showed a bit of a
revival so it will be interesting to see whether this has been
maintained," Investec chief economist Philip Shaw said.
Other U.S. data due next week include durable goods orders
for June on Thursday.
IFO
In Europe, Germany's Ifo business confidence index will be
watched closely on Wednesday as the European Central Bank seems
poised to rev up its monetary tightening campaign as early as
next month.
"The European business confidence numbers will be important
and should show whether upward momentum has been maintained and
whether the ZEW reading was just an outlier," said Shaw.
The latest Reuters survey shows the Ifo index falling very
slightly to 106.0 in July from 106.8 previously.
Euro zone M3 money supply growth figures for June will also
be watched closely for a steer on ECB thinking.
"Euro zone M3 growth is likely to stay at 8.9 percent yr/yr
in June. This is well above the ECB's reference value for
monetary growth, which is at 4.5 percent," HSBC analysts said in
a research note.
"Current M3 growth rates are one reason among others for the
ECB to continue tightening monetary policy," HSBC added.
Other European data slated for release next week include
French consumer confidence, employment and producer price
numbers on Friday.
In Britain, the Confederation of British Industry's
industrial trends survey for July is due on Wednesday, with
investors looking for a further boost after robust UK data this
week that stocked expectations for a hike in UK interest rates
from the current 4.5 percent in coming months.
Japanese data are also due in the wake of the Bank of
Japan's decision to raise rates for the first time in six years
to 0.25 percent.
Japan's June national CPI on Thursday is seen up 0.6 percent
on the year, while household spending is expected to fall 1.7
percent. Trade data is also due on Tuesday.
However, the impact of data could be muted as the BOJ has
signalled that future rate increases would be gradual and the
central bank was likely to keep rates low.
will be the highlight of a fairly busy data calendar and is
expected to support the recently softened view on inflation and
growth taken by U.S. Federal Reserve chief Ben Bernanke.
In Europe, the focus will be on Germany's Ifo business
confidence numbers, with markets looking for evidence to back up
expectations for the European Central Bank to raise interest
rates beyond the current 2.75 percent next month.
Japanese consumer price index and trade balance numbers are
also due, following the Bank of Japan's decision to raise
interest rates for the first time in six years earlier this
month.
The U.S. central bank chief dampened feverish expectation
for further U.S. rates hikes from the current 5.25 percent with
congressional testimony earlier this week, saying U.S. inflation
was likely to ease.
Bernanke said he expected core inflation, which excludes
food and energy costs, to fall in coming quarters as the economy
slows, echoing what the Fed suggested after it last boosted
rates: that slowing growth would take the steam out of
inflation.
"During periods when the Fed has produced a relatively
dovish statement, the dollar has gone down, and investors have
sought out other markets and generally pursued higher risk,"
Bank of New York currency strategist Neil Mellor said.
"If we continue to see relatively weaker data we might start
to see a resumption in spending on high-yield markets in the Far
East and emerging markets. That does assume that the events in
the Middle East don't affect investor confidence," he added.
U.S. consumer confidence data on Tuesday and key second
quarter gross domestic product numbers on Friday are both seen
backing up the softer Fed stance.
July consumer confidence is seen falling to 104.7 from 105.7
in June, according to a Reuters forecast, while advance second
quarter GDP figures are expected to show that growth eased to
3.0 percent in the second quarter from 5.6 percent previously.
One fly in Bernanke's moderating growth ointment could be
Tuesday's existing home sales data. Sales were expected to total
6.6 million.
"Housing data will be worth watching as the Fed has made
clear it believes the housing market is one of the major drivers
of consumer spending. The May housing figures showed a bit of a
revival so it will be interesting to see whether this has been
maintained," Investec chief economist Philip Shaw said.
Other U.S. data due next week include durable goods orders
for June on Thursday.
IFO
In Europe, Germany's Ifo business confidence index will be
watched closely on Wednesday as the European Central Bank seems
poised to rev up its monetary tightening campaign as early as
next month.
"The European business confidence numbers will be important
and should show whether upward momentum has been maintained and
whether the ZEW reading was just an outlier," said Shaw.
The latest Reuters survey shows the Ifo index falling very
slightly to 106.0 in July from 106.8 previously.
Euro zone M3 money supply growth figures for June will also
be watched closely for a steer on ECB thinking.
"Euro zone M3 growth is likely to stay at 8.9 percent yr/yr
in June. This is well above the ECB's reference value for
monetary growth, which is at 4.5 percent," HSBC analysts said in
a research note.
"Current M3 growth rates are one reason among others for the
ECB to continue tightening monetary policy," HSBC added.
Other European data slated for release next week include
French consumer confidence, employment and producer price
numbers on Friday.
In Britain, the Confederation of British Industry's
industrial trends survey for July is due on Wednesday, with
investors looking for a further boost after robust UK data this
week that stocked expectations for a hike in UK interest rates
from the current 4.5 percent in coming months.
Japanese data are also due in the wake of the Bank of
Japan's decision to raise rates for the first time in six years
to 0.25 percent.
Japan's June national CPI on Thursday is seen up 0.6 percent
on the year, while household spending is expected to fall 1.7
percent. Trade data is also due on Tuesday.
However, the impact of data could be muted as the BOJ has
signalled that future rate increases would be gradual and the
central bank was likely to keep rates low.
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