26 Aug 2019
UK this week
All things Brexit are set to remain front and centre.
This week is the last of Parliament’s summer recess, with MPs set to return on 3 September. Ahead of this, it is possible that that we will hear more from some on where they stand in the Brexit debate. One may well be Tory MP Phillip Lee, who has previously said that he would consider defecting to the Lib Dems over the summer.
Additionally Labour leader Jeremy Corbyn is set to hold a cross-party meeting on Tuesday (27 August) to discuss “everything we can do to stop” a no-deal Brexit. Domestic data is likely to take a back seat to Brexit developments, however it is worth noting that GfK consumer confidence as well as BoE household lending numbers are due.
Europe this week
A busy economic calendar for Eurozone data and one which will be widely watched ahead of the September ECB meeting. At this point, we suspect that it would take a dramatic upturn in economic data and the global backdrop (which looks unlikely) to persuade the ECB not to ease policy in September. As such, we believe the ECB will cut the deposit rate 10bps to -0.50% and restart QE at its September meeting. Nonetheless, the tone of the data may well factor into the scale of easing.
August’s HICP inflation release will be of particular interest, given the softening of ‘core’ inflation to 0.9% (y/y) in July. Additional figures to watch include the second estimate of French and German GDP, and Germany’s IfO survey.
Political developments in Italy will also be of interest after Prime Minister Conte’s resignation last Tuesday, which set the ball rolling on finding a new government. President Mattarella has held discussions with the leaders of the Senate and the Chamber of Deputies as well as with the heads of the main political parties. The question now is whether a workable government can be found without resorting to early elections. Talk continues to blow hot and cold on a 5*/ Democratic Party (PD) grouping, but it remains to be seen whether anything can be agreed quickly, suggesting the uncertainty is set to roll into next week.
US this week
Casting the ongoing US/China trade spat aside, inflation data will be one to watch, with the Fed’s preferred measure, PCE, due to be published on Friday.
Minutes from the July FOMC meeting revealed that a couple of participants advocated a 50bps cut in the Fed funds rate (although they did not go as far as to dissent from the 25bps cut) given worries over ‘stubbornly low inflation’. Any inflation data is therefore likely to be scrutinised for any potential impact it could have on Fed policy, given the significant amount of policy easing built into market expectations. In addition to the inflation figures, the second estimate of Q2 GDP and durable goods orders are both due.
G7 Leaders meet in Biarritz
09.00 GE IfO business climate index
13.30 US Durable goods order
14.45 UK BOE's Carney speaks in Frankfurt