Absent any major geopolitical shocks, it is set to be a quiet summer week ahead with focus on the Jackson Hole conference. On the data front the key releases will be US durable goods and Eurozone PMIs, as well as Japan inflation & UK and Norway GDP. In Emerging Markets, there are monetary policy meetings in Indonesia, Hungary and Kazakhstan.
As Barclays writes, all eyes will be on the Jackson Hole Economic Symposium over 24-26 August. As various media reports have noted in advance, ECB President Draghi will be speaking and he may or may not, depending on which trial balloon one believes, announce ECB balance sheet tapering. The British bank believes the risk for the EUR around the event is biased to the downside, and that EUR bulls might be disappointed by a lack of meaningful hints on ECB monetary policy normalisation. The market is preparing for a potential spike in volatility, with the previously noted one-week vol premium (covering the Jackson Hole conference) spiking.
In contrast, the bank sees modest upside risk to the USD, given the possibility that a confident message from Janet Yellen is delivered in the context of low market pricing for the Fed’s rate path and short USD positioning. Recent economic data softness and concerns over Trump’s ability to achieve policy goals are some negative factors for the USD, however.
Some more thoughts on Jackson Hole from DB’s Jim Reid:
There might be a few less nerves about the next few days in markets than many felt a few weeks ago. Back then, Thursday’s commencement of the annual Jackson Hole Symposium seemed to be a natural place for Mr Draghi to signal that exit from QE was soon to be accelerated. However a combination of still soft global inflation data and the Euro’s recent ascent has made it unlikely that the event will be a watershed moment. Expect him to be upbeat on the economy but the hawkish/dovishness indicator might be swayed one way or the other on how much attention the Euro gets in his remarks. Draghi is expected to speak in the afternoon on the 25th August, with remarks focusing on the themes of the conference. Before then, don’t relax until the summit opens as Mr Draghi is warming up for the trip by speaking at the Lindau economics symposium in Germany on 23 August and as such he could front run himself! So two symposiums back to back! Impressive stuff.
We will have a full Jackson Hole preview shortly, meanwhile in addition to Jackson Hole, we have PMIs in the Eurozone and durable goods in the US, in an otherwise unremarkable calendar. The UK will also be releasing further papers describing Brexit Strategy. In unknown unknowns, the on-going North Korea tensions remain a key risk as do continuing NAFTA negotiations.
- In the US, durable goods will be the main release, while we also get new home sales and speeches from the Fed’s Kaplan in addition to the Jackson Hole speeches.
- In the Eurozone, we have PMIs and the German IFO, as well as consumer confidence and the final GDP print for Germany. Several ECB speakers are also on the agenda.
- In the UK, we have the second print of Q2 GDP, as well as public finances data. The government will also likely release further Brexit documents.
- In Japan, focus will be on the inflation release.
Breaking down the week’s key events on a day by day basis, here is Jim Reid’s with the key highlights:
- Monday starts with the July Chicago Fed national activity index, which missed, printing at -0.01 for July, below June’s 0.16 print.
- Onto Tuesday, the ZEW survey on economic expectations for the Eurozone and Germany are due. Then the UK will release various data including: the July net private sector borrowing and July public finances data as well as the CBI full volume of total order book balance. Over in the US, the FHFA house price index and Richmond Fed manufacturing index are also due.
- Turning to Wednesday, the Markit flash PMIs on manufacturing, services and the composite will be out for the US, Eurozone, Germany and France. The Eurozone’s advance consumer confidence for August will also be out. Over in the US, there is the MBA mortgage applications and new home sales data for July.
- For Thursday, a big day for the UK, with the preliminary 2Q GDP, private consumption, export / import, index of services and total business investment data due. Then France’s business and manufacturing confidence index will also be due. Over in the US, there is the Kansas City Fed manufacturing index, initial jobless claims, continuing claims and existing home sales data.
- Back in Asia, Japan’s July inflation data will be out in early Friday morning. Finally on Friday, a big day for Germany, with the final 2Q GDP data out early in the morning, as well as 2Q data on private consumption, capital investment, export / import and domestic demand. Further, the IFO business climate and expectations for August will be out later on. In France, there is the consumer confidence data. Over in the US, we have the durable goods orders and capital goods orders for July. Notable US companies reporting this week include: Intuit, Lowe’s and HP.
In other events, the UK is expected to publish five more position papers for the upcoming Brexit negotiations. Today the OPEC’s full technical committee meets to discuss compliance with production targets. Then on Tuesday, ECB’s Vice President Constancio speaks on inequality and distributional impact of macroeconomic policies. Turning to Wednesday, Draghi will speak in Lidau (Germany), potentially providing an update on QE. Over in the US, the Fed’ Kaplan will also speak. Onto Thursday, and the Jackson Hole symposium kicks off. Back in Italy, the ECB governing council member Visco (governor of Italy) will speak. Finally, on Friday, the much anticipated speech from Yellen on Financial stability at Jackson Hole, follow by Draghi’s speech in the afternoon.
Finally, here is Goldman with a detailed breakdown as well as consensus estimate for the week’s key US events:
The key economic data release this week is the durable goods report on Thursday. There are a few scheduled speaking engagements by Fed officials this week, including a speech by Fed Chair Yellen on Friday at the Jackson Hole Economic Symposium.
Monday, August 21
- There are no major economic data releases.
Tuesday, August 22
- 09:00 AM FHFA house price index, June (consensus +0.5%, last +0.4%): Consensus expects the FHFA house price index to rise 0.5% (mom sa) in June on top of a 0.4% gain in May. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller home price index, but is based only on properties financed with conforming mortgages. On a year-over-year basis, FHFA home prices rose 6.9% in May.
- 10:00 AM Richmond Fed manufacturing index, August (consensus +10, last +14)
Wednesday, August 23
- 09:00 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Federal Reserve President Robert Kaplan will participate in a moderated Q&A session at a members’ luncheon hosted by the Permian Basin Petroleum Association.
- 09:45 AM Markit Flash US manufacturing PMI, August preliminary (consensus 53.4, last 53.3)
- 09:45 AM Markit Flash US services PMI, August preliminary (consensus 54.9, last 54.7)
- 10:00 AM New home sales, July (GS -0.8%, consensus flat, last +0.8%): We estimate new home sales declined 0.8% in July, following an 0.8% gain in the prior month. The level of new home sales looks elevated relative to single-family building permits, so we anticipate some retracement in Wednesday’s report.
Thursday, August 24
- 08:30 AM Initial jobless claims, week ended August 19 (GS 240k, consensus 236k, last 232k); Continuing jobless claims, week ended August 12 (consensus 1,950k, last 1,953k): We estimate initial jobless claims rose 8k to 240k in the week ended August 19. Initial claims can be particularly volatile around this time of year due to annual auto plant shutdowns. Additionally, we note the level of claims in California looks depressed, which could reverse in the upcoming report.
- 10:00 AM Existing home sales, July (GS flat, consensus +0.7%, last -1.8%): We estimate existing home sales were flat in July, following a 1.8% decline in the prior month. Regional housing data released so far suggest a modest slowdown in closed homes sales. Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.
- 11:00 AM Kansas City Fed manufacturing index, August (consensus +11, last +10).
Friday, August 25
- 08:30 AM Durable goods orders, July preliminary (GS -6.5%, consensus -6.0%, last +6.4%); Durable goods orders ex-transportation, July preliminary (GS +0.3%, consensus +0.4%, last +0.1%); Core capital goods orders, July preliminary (GS +0.3%, consensus +0.4%, last flat); Core capital goods shipments, July preliminary (GS +0.2%, consensus +0.1%, last +0.1%): We expect durable goods orders to deteriorate 6.5% in the July report, driven by a decline in commercial aircraft orders. Orders commentary from industrial companies remains encouraging, and we estimate durable goods orders ex-transportation increased 0.3%. We also estimate firmer core capital goods orders (+0.3%). However, manufacturing production growth was modest in July with a 0.2% gain in ex-auto. Accordingly, we look for a 0.2% increase in core capital goods shipments.
- 10:00 AM Fed Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Janet Yellen will give a speech on financial stability at the Kansas City Federal Reserve Bank’s annual Economic Symposium in Jackson Hole. The topic of the conference this year is “Fostering a Dynamic Global Economy”. Audience and media Q&A is not expected.
Source: BofA, Barclays, DB, Goldman