The focus for the week ahead will be on US non-farm payrolls for Jul, the US ISM and global Markit PMIs, and the RBA and BoE rates meeting.
Increased infections of the delta variant have started to take hold again in several regions/countries.
Data has so far confirmed a sharp contraction in activity in Aus due to severe, and now extended lockdowns that have been reinstated. The RBA will meet this week, and previously announced QE tapering may be reversed. The extended nature of these lockdowns means that a second recession is possible, and some fiscal support has been reinstated. RBA Governor Philip Lowe will provide testimony to the House of Representatives later this week and the RBA will also release the Statement on Monetary Policy (SOMP).
Last week, the FOMC left monetary policy unchanged. Fed Chair Powell noted that the pandemic impacts on the economy have eased, supported by vaccinations. Of note though was that the rate of vaccinations has eased, and the delta strain has been spreading. So far, those sectors most impacted by the pandemic have yet to recover. The committee will continue to assess progress towards the average 2% inflation and full employment goals.
This week, US non-farm payrolls will be important. Growth in nonfarm payrolls is expected to be 900k in Jul (versus +850k in Jun). In recent weeks, the initial claims data has been weaker.
US ISM reports on manufacturing and services will be released for Jul. So far, demand has remained intact, despite lengthening lead times, rising backlogs, falling inventories, supply chain issues, and rising input prices. The ISM manufacturing PMI is expected to be 60.8 (Jun 60.6). The ISM services PMI is expected to be 60.4 (Jun 60.1).
This week, the US Treasury will settle $465bn in ST Bills, Notes, and Bonds raising approx. $60bn in new money. Approx. $21bn in ST Bills will mature on the Fed balance sheet and will be rolled over.
There will be an update this week (4 Aug) on the estimated borrowing requirements for the US Treasury in Q3 and Q4. This will include funding assumptions regarding the expiration of the suspension of the debt ceiling.
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
