by Kim | Sep 27, 2021
The focus for the week ahead will be on US Fed and central bank speeches, and inflation data.
This week, the ECB will host the Forum on Central Banking on 28-29 Sep. US Fed Chair Powell will take part along with other major central bank leaders. There is potential for headline risk as central banks start talking about tapering.
US Fed Chair Powell will also supply testimony to the US Senate this week on the CARES Act. There will be numerous other Fed Presidents and FOMC members speaking this week (not all listed in the calendar).
Last week, there was no change to the stance of US Fed monetary policy. Fed Chair Powell announced that the FOMC is preparing to start tapering QE purchases. The tapering process is expected to conclude around the middle of 2022 – as long as the recovery remains on track. The taper may be announced in Nov – the next non-payrolls will be important (always is), as will signaling in Fed speeches after that time.
The FOMC revised growth projections lower to 5.9% for 2021 (compared to the Jun forecast) but upgraded the forecast for 2022. The unemployment rate forecast was revised higher to 4.8% for 2021 and the 2022 forecast was unchanged at 3.8%. The 2021 forecast for inflation was revised higher to 4.2% for 2021 (from the 3.4% forecast in Jun). Importantly, the medium-term inflation is forecast to remain above the Fed target level. The FOMC projections for the next rate change are now split 50/50. Nine (9) FOMC members expect no change to rates in 2022 and the other nine (9) expect at least one rate increase by the end of 2022.
Other central banks have either indicated an intention to start to ease QE purchases (BoE last week) and ECB previously (currently “recalibrating” purchases) or have already started to taper QE purchases. The only central bank that has not done so is the BoJ – still citing caution over the pandemic.
This week, the prelim Eurozone CPI for Sep will be released. The headline expectation is for CPI growth of +3.3% (prior 3%).
US PCE inflation data will also be released this week for Aug. Core PCE price growth is expected to remain around 3.5% (from 3.6% in Jul). Headline PCE inflation increased from 4% in Jun to 4.2% in Jul.
This week, the US Treasury will settle approx. $370bn in ST Bills, Notes, TIPS, and Bonds raising approx. $11.4bn in new money. The new money raised this week is relatively low given the size of issuance due to reduced auction amounts on some ST Bills and the removal of a CMB. Approx. $47bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet this week and will be rolled over. The 4-week Bill rate remains somewhat elevated in the lead-up to debt ceiling negotiations. The 8-week Bill rate has moderated.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 27, 2021
Last week saw equities decline sharply in 3 waves on a technical break of support before rallying for the remainder of the week. It now appears that we have a corrective 3 waves down from ATH's and an impulsive rally up off the lows. The question is whether this latest rally is part of a […]
by Kim | Sep 20, 2021
The focus for the week ahead will be firmly on the US FOMC policy decision and a notable number of other central bank meetings.
The FOMC will meet this week and submit new economic projections (SEP). The policy decision is likely to include a timeline for tapering – to possibly commence later in Q4. But there is also a chance that the Fed doesn’t announce a taper timeline at this meeting (maintain optionality). Either way, the SEP will be important this month to understand how committee members judge the progress of the recovery, whether there is any consensus around growth slowing and the impact on the outlook. The FOMC will want to keep a taper decision independent from any link to a future rate increase to ensure that markets don’t interpret the taper as a part of a tightening path.
US Fed Chair Powell will speak on Friday at a virtual event – “Perspectives on the pandemic recovery”.
Other central bank meetings this week: the BoJ, the BoE, and the PBoC. There is a holiday in China on 20/21 Sep and the PBoC, or other Chinese policymakers may step in to support markets in the wake of slowing growth and regulatory crackdowns. The minutes of the latest RBA meeting will also be published this week.
There are a notable number of other central bank meetings this week (not listed in the calendar) that may pose some specific headline risk: Sweden, Indonesia, Brazil, SNB, Philippines, Norway, Turkey, and South Africa.
Other important points this week will be US housing market data for Aug. This includes existing home sales expecting 5.89m (5.99m SAAR basis in Jul), building permits expecting 1.61m (prior 1.63m), and housing starts expecting1.56m (prior 1.53m).
The prelim PMI’s will provide a view of private sector momentum coming into Sep across the major economies.
This week, the US Treasury will settle approx. $191bn in ST Bills and FRN’s this week, with a net paydown of -$90bn (new issuance < maturing securities).
The 10yr TIPS and 20yr Bond will be auctioned this week and will settle next week.
Approx. $11bn in ST Bills will mature on the Fed balance sheet this week and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 20, 2021
Last week, equities continued to stair step lower and finally broke layered support at Friday's close. Equities remain bearish while below Friday's highs with strong downside potential given this break of structural support. From a big picture perspective, we continue to see this rally up from the March 2020 lows as a final 5th wave […]
by Kim | Sep 13, 2021
The focus on the week ahead will be on US data – notably the CPI for Aug, retail sales, and consumer sentiment.
It will be a quiet week on the central bank front ahead of the FOMC meeting next week.
This week, the US CPI for Aug will be reported, and the pace of acceleration is expected to ease but growth will remain elevated. CPI growth in Aug is expected to be +5.3% (Jul prior +5.4%). US retail sales for Aug are expected to decline by -1% (-1.1% Jul) and the weaker consumer sentiment is expected to persist with a small gain from 70.3 in Aug to 72 in the first half of Sept. Also out this week will be several of the regional Fed surveys with an early view of Sept manufacturing momentum.
Data this week, together with the weaker growth in non-farm payrolls for Aug and the recent moderate downshift in growth noted in the Beige Book last week will be key inputs into the Fed decision next week.
In Aus, the RBA Governor Philip Lowe will speak this week. Last week, the RBA Board did not overturn its previous tapering decision despite the current Delta outbreak. QE purchases at the lower rate were extended through to at least Feb 2022 (rather than reviewed earlier). Restrictions remain in the two big states, albeit starting to ease, and vaccination rates are continuing to increase. The 70-80% (of 16yrs+) vaccination threshold should be reached by Oct/Nov for a broader ‘reopening’. The RBA noted that the recovery has only been “interrupted” at this stage, with the setback in growth expected to be temporary. Growth in Q4 is expected to rebound. The Aus labour market data out this week will be important, and employment is expected to decline by 70k (+2.2k in Jul). Participation is expected to contract notably, and the unemployment rate is expected to increase to 4.9% (from 4.5% in Jul).
The remainder of the Chinese data for Aug will be released this week – including industrial production, retail sales, FA investment, loans, and the house price index. Concerns remain over slowing growth in China (amid government crackdowns).
This week, the US Treasury will settle approx. $293bn in ST Bills, Notes, and Bonds this week, raising approx. $30bn in new money.
Approx. $28bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
