The coming week will be eventful, with several key economic indicators and policy announcements scheduled in various regions:

Monday will feature the release of the Flash Manufacturing PMI and Flash Services PMI for the United States. On Tuesday, Japan will report BoJ core CPI y/y, while the United States will release the CB consumer confidence index.

Wednesday will bring important data for Australia, with the release of inflation figures. In the United States, new home sales data will be released along with the highly anticipated FOMC statement, federal funds rate decision and FOMC press conference.

Thursday is important for the Eurozone as it will make a statement on monetary policy. In addition, the United States will provide pending home sales data for the month.

On Friday, Tokyo Core CPI y/y for Japan will be released, followed by the most anticipated event of the day, the BoJ Outlook, which includes the monetary policy statement, the BoJ interest rate decision and the BoJ press conference. Switzerland will share its KOF economic barometer on the same day. For the United States, data will be released for Core PCE Price Index m/m, Employment Cost Index q/q, Revised MJM Consumer Sentiment and Revised MJM Inflation Expectations.

The expected consensus for the US Flash Manufacturing PMI suggests a decline from 46.3 to 46.1, while the Flash Services PMI is expected to decline from 54.4 previously to 54.0. It is worth noting that a reading above 50 still indicates expansion in the services sector, indicating that despite the decline in PMI readings, services activity is showing signs of improvement and remains a key driver of consumption in the economy.

Core CPI y/y for Japan is expected to show a slight decline from 3.1% to 3.0%. This change is likely to be influenced by the stabilization of commodity prices leading to a reduction in the energy contribution. However, there remains a significant degree of uncertainty around the inflation data due to extraneous factors such as price projections and government policies that will continue to play a role.

As for the US, the CB Consumer Confidence Index is expected to show some improvement, rising from 109.7 to 112.1. Analysts at Citi point out that this particular measure is more sensitive to employment conditions compared to the University of Michigan index due to the inclusion of a specific question about job availability in the CB survey.

The upcoming CPI data for Australia is important to watch as it may provide clues about future RBA actions. Specifically, it could indicate whether the bank will resume its tightening cycle at the next meeting scheduled for August. We remind you that at the previous meeting in July, the RBA decided to keep its monetary policy unchanged.

Australian inflation continues to remain above the central bank’s target and the labor market is experiencing tight conditions with unemployment near record lows. While there are signs that inflation could be cooling, the strength of the labor market will play a role in influencing the RBA’s decision. If inflation slows less than forecast, it could provide enough justification for the RBA to hike by 25 basis points at the upcoming meeting.

During this week’s FOMC meeting, analysts agreed on a rate hike of 25 basis points. It is worth noting that at the previous meeting, the Federal Reserve decided to leave rates unchanged, indicating that the tightening cycle is not yet complete. Currently, the market expects one more rate hike before the end of the year.

Recent US inflation data showed some signs of cooling. However, the Fed is unlikely to be fully convinced that inflation will not rise again in the fall, given that it is currently well above its target. The Fed will need more evidence to be sure this cooling trend isn’t just temporary. Monetary policy decisions operate with a time lag, requiring a wait-and-see approach to observe their effects over a longer period. Additionally, while job growth is experiencing some slowdown, the labor market as a whole remains very tight, further adding to the complexity of the Fed’s decision-making process.

The 25 basis point increase in Wednesday’s session is fully priced in by the market, making it more likely to see a reaction to any guidance from Chairman Powell’s press conference on future rate hikes than to the hike itself.

Inflation figures for the euro area remain high, requiring further attention and action from the ECB. The bank has already hinted at the possibility of a further 25 basis point rate hike and it is likely that they will introduce it at this meeting. Furthermore, there is the potential for another rate hike at their September meeting and any hints or clues on this matter will be closely watched by market participants and analysts. The ECB’s decisions in the coming months will play a crucial role in managing inflationary pressures and shaping the region’s economic outlook.

US new home sales are expected to fall to 721,000 from the previous 763,000. So far, the data has beaten expectations, for example new home sales saw a stronger increase over the year compared to existing home sales.

Until last week, market expectations for Friday’s BoJ meeting included a potential YCC policy adjustment. However, the odds have now shifted in favor of no changes to current monetary policy, including the YCC. Citi analysts, however, highlighted the possibility that the median projections of board members in the July Outlook could indicate three years of inflation above 2% starting in FY22.

The BoJ’s approach appears to lean towards caution as it would prefer to be behind the curve if inflation remains above 2% next year. This cautious stance is preferable to the risk of a premature tightening cycle that could hinder economic recovery and prolong the period of low inflation. Although a change in monetary policy is expected next year, further developments remain uncertain, making it difficult to predict how the situation will develop.

In Japan, inflation is currently above the BoJ’s target, but not as high as in other developed countries. GDP rose 2.7% quarter-on-quarter in Q1, and the Tankan survey for Q2 indicated an improvement in confidence among both manufacturers and non-manufacturers.

Data on personal income and personal spending for June are expected to show a slight increase. Personal income figures are likely to rise by 0.5% m/m and personal spending is also expected to increase by 0.4%. In addition, core PCE is expected to increase by 0.21% m/m.

This article was written by Gina Constantin.