This week, market participants will have their eyes on key economic indicators from Australia, the US, and China, as these data points are expected to provide deeper insights into inflation trends and economic health.
Australia’s Monthly Consumer Price Index (CPI) release on 26 June is expected to be noteworthy. The Reserve Bank of Australia (RBA) has maintained its official cash rate at 4.35% for the fifth consecutive meeting, acknowledging that while inflation is easing, it is doing so more slowly than expected.
Pricing pressures remain above the target range of 2-3%, and the upcoming CPI release is expected to show an increase to 3.8% from the previous 3.6%. This marks the third consecutive month of inflation rise. Market expectations suggest that the RBA might begin its policy easing cycle in April next year.
A lower-than-expected CPI reading could push this timeline forward, impacting the Australian dollar and equity markets.
In 2015, a sudden drop in inflation prompted a quicker-than-expected rate cut, resulting in a swift depreciation of the AUD. Conversely, in 2019, persistent inflation led the RBA to delay rate cuts, temporarily bolstering the AUD.
On 28 June, the US Core Personal Consumption Expenditures (PCE) Price Index will be closely watched. Recent US consumer and producer price data for May indicated downside surprises, reflecting further progress in inflation control. The PCE price data, the Fed’s preferred inflation gauge, will be scrutinised for signs of continued progress.
Both headline and core PCE data have eased to the 2.7-2.8% level from their 2022 peaks but remain above the Fed’s 2% target.
Expectations are for the headline PCE to come in at 2.6% year-on-year, down from 2.7%, and for core PCE to also come in at 2.6%, down from 2.8%. Further progress in inflation control could provide the Fed with greater flexibility around upcoming rate cuts.
China’s economic health will also be under the microscope with the release of the National Bureau of Statistics (NBS) Manufacturing and Non-Manufacturing Purchasing Managers’ Index (PMI) on 30 June.
China’s official May manufacturing PMI fell back into contractionary territory at 49.5, down from 50.4, while the non-manufacturing PMI also underperformed, coming in at 51.5, the lowest since February 2024.
The third consecutive month of weaker PMI data suggests ongoing challenges for China’s economic recovery. Further downside surprises in PMI data may signal a warning for China’s recovery efforts and prompt calls for more policy support.
PMI data could impact global markets, especially those with strong trade ties to China, and may lead to increased market volatility and influence commodity prices, particularly those related to industrial production.
This week promises to be pivotal for markets. Economic indicators from Australia, the US, and China will not only provide insights into current inflation trends and economic health but will also likely influence central bank policies and market sentiment.
As always, staying tuned to these developments will be essential for traders and investors looking to navigate potential shifts in market dynamics.
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