Episode Details

Imogen Bachra shares her quick take on the big themes and events likely to move markets over the coming week: 

• US market focus is squarely on the inflation data. Fed Chair Warsh clearly overweighted the inflation data relative to current employment trends in his reaction function, and Governor Waller’s comments in the last week reiterated that point. The strength in the employment report on Friday has raised the bar for the Fed not to hike, but it still feels like a close call that will hinge on the inflation data. For anyone that missed it, following Chair Warsh’s comments at Jackson Hole and the upside revisions to the PCE data, we have now revised our base case call and expect the Fed to hike in September.
•  A 25bp hike by the ECB feels all but certain: recent communication and the July meeting account leave little doubt that the Governing Council is prepared to tighten again. The more consequential question is what comes next. With policymakers showing little appetite for strong forward guidance, the ECB is likely to preserve maximum optionality amid continued uncertainty over energy prices, inflation persistence and the durability of growth. Next week’s data schedule (Sentix investor confidence, the third estimate of Q2 GDP and accompanying employment data) should give a clearer read on the composition and resilience of euro are growth heading into the second half of the year.
•  In the UK, renewed upside pressure on yields this week brought a renewed focus on the fiscal risks. New Chancellor John Healey is set to give a keynote speech on Monday outlining the government’s economic agenda, which could prove another crucial moment for the gilt market to reassess fiscal risks.
•  We’re still watching Japan, both in terms of potential fiscal and monetary policy shifts, but there is nothing specific on the calendar next week that is set to move the needle on either. We’re more focussed on the week after, eyeing a potential government re-shuffle and of course the long-awaited BoJ meeting, where we now  expect a hike to be delivered.