UPCOMING EVENTS:

• Monday: UK
  Bank Holiday, Australian Retail Sales.
• Tuesday: Japan
  Unemployment Rate, US Consumer Confidence, US Job Openings.
• Wednesday: Australia
  CPI, US ADP.
• Thursday: Japan
  Retail Sales, Chinese PMIs, ECB Minutes, Eurozone CPI, Eurozone
  Unemployment Rate, US Jobless Claims, US Core PCE.
• Friday: Swiss
  CPI, US NFP, US ISM Manufacturing PMI.

Tuesday

The US Consumer Confidence has been
sizzling up in the past few months as the consumers continue to see a strong
labour market, higher real wages, and lower inflation.
Compared to the University of Michigan Consumer Sentiment, which shows more how
the consumers see their personal finances, the Consumer Confidence shows how
the consumers
see the labour market. The consensus sees the
index at 113.4 in August vs. 117.0 in July.

The labour market data is now the top
priority for the Fed and the markets
as a softer labour market is what is seen as needed to reach the 2% inflation
target sustainably. After reaching the peak in May 2022, Job Openings have been
trending lower although they are seen as still too high. The consensus sees Job
Openings increasing to 9.793M in July vs. 9.582M in June.

Wednesday

The monthly Australian CPI Y/Y data is
expected to show further disinflation with the consensus looking at 5.2% in
July vs. 5.4% in June. The latest RBA
Meeting Minutes showed that the central
bank prefers to remain on hold and given the recent weaker data like the Employment
Report, it looks like only a notable beat
can stir the RBA from this path.

The US ADP continues to be pretty useless in
forecasting the US NFP, but the market keeps on reacting to it, nonetheless.
The consensus sees 195K new hires in August vs. 324K in July.

Thursday

The Chinese Manufacturing PMI is expected
to tick higher to 49.5 vs. 49.3 prior, while there’s currently no consensus on
the Services reading although it was 51.5 in July. The Chinese economy has been
struggling for quite some time and, despite promises of more support from the
authorities, the market interpreted the latest actions as not enough.

The Eurozone CPI Y/Y is expected to move
lower to 5.1% vs. 5.3% prior, while the M/M figure is seen at -0.1% vs. -0.1%
prior. The Core CPI Y/Y is expected at 5.3% vs. 5.5% prior. There’s a
growing sentiment among the ECB members that downside risks have materialised,
and it requires a more careful assessment on the policy front. The market sees
a 50/50 chance for a 25 bps hike at the September meeting and this report should
decide what we will likely see at the next policy decision. The Unemployment
Rate is seen unchanged at 6.4%.

The US Jobless Claims remain a key
leading indicator for the labour market, and they’ve been signalling continued
strength. The consensus sees Initial Claims at 235K vs. 230K prior, while
Continuing Claims are expected at 1709K vs. 1702K prior.

The US PCE Y/Y is expected at 3.3% vs.
3.0% prior, while the M/M figure is seen at 0.2% vs. 0.2% prior. The Core
PCE Y/Y, which is the Fed’s preferred inflation measure, is expected at 4.2%
vs. 4.1% prior, while the M/M reading is seen at 0.2% vs. 0.2% prior. I
don’t expect this report to be market moving given that the market is more
focused on the more timely CPI data.

Friday

The Switzerland CPI Y/Y is expected to
match the prior reading at 1.6%, while the M/M figure is seen at 0.2% vs. -0.1%
prior. As a reminder, the inflation rate in Switzerland is already in the
SNB’s 0-2% target band on both the headline and core measures, but the
central bank maintains its hawkish stance wary of upside risks. Nonetheless, the market sees the SNB to remain on hold at the next meeting.

The main event of the week will be, of
course, the US NFP report. The consensus sees 170K jobs added vs. 187K prior
with the Unemployment Rate remaining unchanged at 3.5%. The Average Hourly
Earnings Y/Y is seen at 4.4% vs. 4.4% prior, while the M/M figure at 0.3% vs.
0.4% prior. This report coupled with the US CPI in two weeks will decide if
the Fed will hike or pause at the September meeting, as per their words
they will “decide on the totality of the data”. In my opinion, given the
Fed’s particular focus on the labour market, in case we get a hot report, the
market is likely to anticipate a hawkish reaction without waiting for the CPI
data.

The US ISM Manufacturing PMI is expected
to tick a little higher to 46.6 vs. 46.4 prior. The US S&P Global
Manufacturing PMI missed expectations by a big margin last week, so the
sentiment going into this report is likely to be skewed to the downside. There
should also be particular attention to the employment sub-index which tumbled
to cycle lows in the prior report.