With a busy week ahead, Thomas Watts, Investment Analyst, abrdn MPS, comments on the economic data releases on the horizon this week which are likely to be of interest to wealth managers saying;
“With the Olympics in full swing a host of central banks are poised on the starting line but shouldn’t travel too far in terms of rate movements making this week an important time for those watching the markets. The Bank of Japan (BoJ), US Federal Reserve and the Bank of England (BoE) are to hold press conferences to announce their latest views on base rates.
Wednesday is predicted to see the BoJ hold fire on adjusting its borrowing costs but to unveil details of a quantitative tightening plan aimed at reducing its holdings of government bonds. Given the size of its balance sheet and large presence in the market, the move will be a massive undertaking with various factors for policymakers and investors to consider. While a wide range of views has surfaced, the broad consensus centres on the BoJ gradually reducing its monthly purchases of government bonds to 3 trillion yen, halving from its current pace of 6 trillion yen.
With neither central bank potentially looking to raise rates next week, when listening to both the Federal Reserve and Bank of England’s press conferences, investors may have to settle for the silver medal of focussing on the forward guidance, with both expected to clear the path for a September rate cut. Both press conferences could have an amplified effect on market volatility however, especially in the currency markets, as traders scrutinise their words for any hints of future rate policy.
On the economic data front, the data that should really have a ring to it this week will be US non-Farm Payroll data, released on Friday. Often considered one of the Fed’s favoured pieces of information when determining their next rate move, we should expect heightened market volatility come the end of the week during its release. The employment data itself will be accompanied by Average Hourly Earnings, allowing us to gauge future inflation expectations as the more consumers earn, the more they tend to spend. It all combines to be a vital piece of data for the Federal Reserve and should take on added significance as the central bank mulls a September cut.”
