Macroeconomics: The Day Ahead for 24 June

Markets wait and watch to see if the US president’s declaration of a ceasefire and end to the ’12-day War’ between Israel and Iran actually holds (I still recall being in Libya as a child and the curfews that were imposed during the 6-day War), with Israel agreeing to the cessation to hostilities. Otherwise surveys and Canada and Mexico’s CPI dominate a relatively light statistical calendar, with a very busy run of events featuring the China ‘Summer Davos’ conference, the start of a 4-dey meeting of the China’s NPC Standing Committee, the first of two day’s testimony from Powell to Congress and a veritable deluge of central bank speakers. Risk appetite has seen a rather modest boost, understandably given the rather modest flight to safety flow, while oil has erased most of its risk premium as the adverse supply/demand balance reasserts itself as the dominant factor. Markets can now refocus on the perennial trade tensions, national political issues such as passage of the US tax and spending bill, France’s thus far failed pensions reforms negotiations that threaten a vote of confidence of PM Bayrou’s government, and a brewing rebellion amongst the UK governments’ backbenchers over the bill to cut disability benefits as outlined in the Spring budget, while bearing in mind that the wars in Ukraine and Gaza still have no end insight. While clearly not as much of a disruptive threat as the Iran/Israel conflict, these are a reminder that there remains a long list of global, regional and national woes.

Germany’s Ifo Business Climate is seen eking out a marginal rise to 88.0 from 87.5, on the back of a slightly better Current Assessment, with Expectations seen unchanged, and overall levels remaining depressed, underlining that the new grand coalition has had limited impact thus far (and doubtless outweighed by geopolitics). The UK CBI Industrial Trends surveys is forecasts to show Orders remaining depressed though slightly higher at -28, and little change in selling prices. Like so much else in terms of UK statistics, the survey’s value as a barometer of the UK economy is debatable. Over in the US, Consumer Confidence is seen marginally higher at 99.8 from 98.0, after a roller coaster ride in recent months on the back of tariff related fears, a further outlier and/or sharp revisions should not be ruled out. However given the Fed’s internal debate on its two policy pillars of inflation and employment, there will be considerable attention given to the Labour Differential, which has fallen in every month of this year, but remains above the 2024 low, and at 13.2 in May stood at a level that signalled still reasonable levels of labour demand. 1-yr Median Inflation Expectations eased somewhat in May to 5.3% from 5.9%, but would need to fall consistently in coming months to materially impact the Fed’s assessment of upside inflation risks. North of the border, Canada’s CPI is expected to see headline remain well contained with a 0.5% m/m rise set to leave the y/y rate unchanged at 1.7%, but core inflation measures forecast to remain uncomfortably high for the BoC at 3.0% y/y, even if modestly lower than April’s 3.2% and 3.1%. The latter implies a relatively high bar to further BoC rate cuts from the current 2.75% level, with governor Macklem underlining that a substantial fall will be needed to redirect the BoC’s attention to the palpable weakness in domestic demand.