U.S. Retail Sales, ECB Meeting, U.K. and Canada Inflation: Macro Week Ahead
U.S. Retail Sales, ECB Meeting, U.K. and Canada Inflation: Macro Week Ahead
By:Ilya Spivak
Stock markets may be in trouble if U.S. retail sales data disappoints, adding to slowdown fears
- Slowing inflation might weigh on the Canadian dollar and the British pound.
- Stock markets may face selling pressure if U.S. retail sales data disappoints.
- A dovish ECB stance may punish the euro as well as Eurozone stock markets.
A defensive tone prevailed on Wall Street last week despite swelling Federal Reserve interest rate cut expectations. Treasury yields plunged across maturities as dovish guidance from Fed chair Jerome Powell and weaker-than-expected inflation data firmed up bets on the start of an easing cycle in September.
Against this backdrop, the bellwether S&P 500 stock index added just 0.8%—the smallest rise in three weeks—while the tech-oriented Nasdaq 100 fell 0.5%. That seemed to mark a tone shift for the markets, whereby recession worries build as the arrival of rate cuts becomes increasingly imminent, as expected.
Against this backdrop, here are the macro waypoints likely to shape what comes next.
Canada consumer price index (CPI) data
Headline inflation held steady at 2.9% year-on-year in Canada last month, according to economists’ median forecasts. The core rate stripping out short-term volatility to get at the central trend in price growth is expected to tick modestly lower to 1.6%, matching the three-year low set in April.
Leading purchasing managers index (PMI) data from S&P Global reported a steep drop in pricing power in June. Input inflation was marked at the lowest level since early 2021, and output prices rose at the slowest pace in 40 months. If that sets the stage for soft CPI, the Canadian dollar may fall amid a dovish repricing of the rate cut outlook.
U.S. retail sales data
Market-watchers expect to see that U.S. retail receipts flatlined in June. Coming on the heels of a standstill in April and a meager 0.1% rise in May, an outcome in line with expectations would complete the weakest quarter for consumption growth since the three months ending December 2022.
U.S. economic data has increasingly disappointed relative to consensus forecasts since mid-April, according to analytics from Citigroup. Stock markets may come under pressure if that sets the stage for a downside surprise as worries about recession continue to mount.
U.K. consumer price index (CPI) data
Inflation is expected to have idled at 2% year-on-year in the U.K. in June, matching the three-year low set in the prior month. Analytics from Citigroup reveal that recent news-flow has soured relative to forecasts, which may foreshadow a print on the low side of forecasts. That might stoke Bank of England rate cut speculation, hurting the British pound.
European Central Bank (ECB) policy meeting
The ECB is expected to keep its target deposit rate unchanged at 3.75% at this month’s policy meeting. Nevertheless, the tone from central President Christine Lagarde at the press conference following the sit-down is likely to remain dovish, underpinned by a recent downturn in economic data. That might weigh on the euro and local stocks alike.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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