Week Ahead: Huge week full of major risk events

The list of calendar events for this week is quite something – FOMC, BoJ, BoC, NFP, US PCE, EZ CPI, AU CPI, US and EZ GDP, and US ISM – we love an acronym. Those economic data points and central bank meetings will hit summer markets with many trading desk staffed by juniors, which means liquidity is thinner and price action could be prone to whippy two-way volatility. We also must add the August 1^st tariff deadline plus more Q2 company earnings including a bevy of megacap tech behemoths such as Meta, Microsoft, Apple and Amazon that report after the US closing bells on Wednesday and Thursday.

Key discussions on potential trade deals / agreements / loose pledges (*delete as appropriate) are taking place between the US and China, and the US and Europe over the next few days. The August 1^st deadline seems likely to go the way of those other previous three time limits we’ve seen pass and be extended. Indeed, Treasury Secretary Bessent, one of the most consistent and coherent voices in the Trump administration, has talked about a rolling 90-day deadline with China. This implies there is no tariff cliff, but the impact on economies, and especially for central bankers will take longer to glean.

Policymakers are very likely to sit on their hands this week, with proper debate not starting until at least September. That’s when there could be more significant data and possibly even some clarity around the administration’s policies on trade. In various ways, the FOMC’s dual mandate means the picture could be complicated for some time, with inflation higher and the employment picture clouded. That’s a tough post for rate setters, especially one’s in the ire of a US President demanding sharply lower interest rates by as much as three percentage points to spur economic growth. And that’s for an economy likely growing at 2.5% and with average 12-monthly jobs gains currently of around 150k.

We find it interesting that there are now more stories about the ‘froth’ in world stock markets as the major US ones made fresh record highs almost daily in the past week. Relief at the US-Japan trade ‘deal’ spurred more buying with equites immune to concerns about excessive US government borrowing and Federal Reserve independence that have knocked Treasuries and the dollar. The latter is down close to 10% against a basket of its peers. Several S&P 500 valuation metrics are near record levels, with talk about “meme stocks” re-emerging. This exuberance is definitely a warning sign – will we see a blow-off top after M.M.A.A earnings or simply a correction after some disappointments?

In Brief: major data releases of the week

Wednesday, 30 July 2025

– Australia CPI: Q2 data will likely influence market pricing for another possible rate cut at the mid-August RBA meeting. Key will be the core inflation measures – trimmed and weighed mean – which have remained in the bank’s 2-3% target range for the prior two quarters.

– US GDP: Q2 growth is expected to rise to 2.5% after the first quarter printed at -0.5% due to imports being brought forward ahead of tariffs. Softer consumer activity is evident on concerns over government policies.

– Bank of Canada Meeting: Rate will be left steady at 2.75% with the bank remaining cautious amid trade uncertainty and unexpectedly positive data. Focus will be on the statement tone and press conference with around10pbs of rate cuts priced in for the rest of 2025.

– FOMC Meeting: The Fed will remain on hold with policymakers generally comfortable with economic and labour market resilience. That said, inflation concerns will be front and centre with tariff uncertainty still high. There’s around a 60% chance of a September 25bps rate cut.

Thursday, 31 July 2025

– Bank of Japan Meeting: The BoJ will keep its interest rate unchanged at 0.5% Median forecasts for real GDP and core CPI will be released. Hot inflation will be offset by US trade policy uncertainty. Focus will be on any signals about rate hikes ahead.  

– US Core PCE: The Fed’s favoured inflation metric is forecast to rise 0.3% m/m in June. Some of the tariff pass through seen in CPI should be evident in this data, but there are differences for weighted components.  

Friday, 1 August 2025

– Eurozone CPI: Consensus sees the headline one-tenth lower at 1.9% and the core one-tenth at 2.2%. The disinflationary impact of a firmer euro on goods prices likely offset upward pressure from services price inflation. The ECB sees inflation stabilising over the medium-term.

– US Non-Farm Payrolls: Consensus expects 101k jobs added, down from the prior 147k. The unemployment rate is predicted to tick one-tenth higher to 4.2%. Wage growth is seen steady at 0.3% m/m. Further gradual deceleration in the labour market is anticipated.

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