• Remarks by Federal Reserve Chairman Powell indicating a hawkish stance and strong economic data led to a reassessment of expectations towards the Federal Reserve. Federal Reserve Chairman Powell stated that more tightening would be needed in monetary policy, driven by a strong labor market. Powell mentioned that core inflation is not expected to return to 2% until 2025.
• Stock market indices in the US closed the week with gains despite the hawkish remarks, as inflation indicators suggested a slowdown in inflation. The Nasdaq index rose by 1.45%, the S&P 500 index by 1.23%, and the Dow Jones index by 0.84%.
• The US dollar index remained flat at 102.9.
• Brent crude oil prices increased by 1.9%, reaching $75.4 per barrel.
• The yield on the 10-year US Treasury note rose by 3 basis points to 3.76%, while the 2-year Treasury note increased by 15 basis points to 4.89%.
• The annualized quarterly GDP growth rate for the US in the first quarter was revised upward from 1.3% to 2%.
• The PCE price indexes for the first quarter were slightly revised downward, with the annualized quarterly PCE price index at 4.1% and the core PCE price index at 4.9%.
• In May, the PCE deflator slowed to 0.1% monthly growth and 3.8% year-on-year, reaching its lowest level since April 2021.
• Personal income increased by 0.4% in May, while personal spending slowed to 0.1%.
• Consumer confidence in the US, as indicated by the Conference Board Consumer Confidence Index, rose to the highest level since January 2022.
• The S&P/Case-Shiller 20-City Home Price Index showed a monthly increase in April but experienced an annual decline of 1.7%.
• The Swedish Central Bank increased its policy interest rate to 3.75%.
• The Eurozone headline CPI increased by 0.3% monthly in June, with an annual rate of 5.5%.
• The Eurozone core CPI increased from 5.3% to 5.4% in June, slightly below expectations.
• The GfK consumer confidence index in Germany decreased slightly to -25.4, ending eight consecutive months of recovery.
• Germany’s external trade figures for May and factory orders data will be released.
• Retail sales data for May in the Eurozone will be released, providing insights into domestic demand.
• Eurozone Producer Price Index (PPI) for May declined by 3.2% monthly and 1% annually.
• The Caixin Services PMI for June indicated a slight slowdown in the sector’s growth.
• The Reserve Bank of Australia is expected to increase the policy interest rate to 4.35% in its upcoming meeting.

Last week in the US, remarks by Powell indicating a hawkish stance and strong economic data led to a reassessment of expectations towards the Federal Reserve. However, on Friday, the stock market indices closed the day with gains as inflation indicators, specifically the PCE (Personal Consumption Expenditures) and personal spending, suggested a slowdown in inflation.

The Nasdaq index rose by 1.45% on a daily basis, the S&P 500 index by 1.23%, and the Dow Jones index by 0.84%.

The US dollar index remained flat, closing the week at the level of 102.9. Brent crude oil prices ended the week with a 1.9% increase, reaching $75.4 per barrel.

The yield on the 10-year US Treasury note rose by 3 basis points to 3.76% during the week, while the 2-year Treasury note, which is more sensitive to changes in monetary policy, finished the week at 4.89%, representing a 15 basis points increase.

• Powell’s Views on Monetary Policy and Interest Rates

Federal Reserve Chairman Powell stated that the decision to keep interest rates unchanged at the latest meeting was to allow more time for decision-making. He emphasized that they would not ignore consecutive interest rate hikes. Powell also expressed the belief that more tightening would be needed in monetary policy, driven by a strong labor market, reiterating that many members projected at least two consecutive interest rate increases this year.

Powell noted that he did not expect core inflation to return to 2% this year or next, but rather by 2025. He emphasized that they would maintain a restrictive stance in monetary policy as long as it is necessary. Powell also pointed out signs of a softening in labor market conditions, highlighting the need for some easing in order to achieve better alignment between supply and demand and a reduction in inflationary pressures.

• Revised First-Quarter GDP Growth Rate

In the US, the final annualized quarterly GDP growth rate for the first quarter of this year was released. The annualized quarterly growth rate of the US economy for the first quarter was revised upward from 1.3% to 2%, surpassing expectations of 1.4%. The upward revision in growth for the first quarter was driven by upward revisions in consumer spending and net exports, while non-residential fixed investment and federal government spending were revised downward.

• PCE Price Index: Inflation Indicators

The Personal Consumption Expenditures (PCE) price indexes, including core measures, which the Fed closely monitors as important inflation indicators, were also announced for the first quarter on an annualized quarterly basis. The annualized quarterly PCE price index was slightly revised downward from 4.2% to 4.1%, and the core PCE price index was revised slightly downward from 5% to 4.9%.

• Monthly PCE Deflator and Personal Income/Spending Data

In terms of monthly price developments, the Personal Consumption Expenditures (PCE) deflator (including core measures) for May and personal income and spending data were followed.

The monthly growth rate of the PCE deflator in May slowed from 0.4% to 0.1%, in line with expectations, while the year-on-year rate declined from 4.3% to 3.8%, reaching its lowest level since April 2021.

The monthly increase in the core PCE deflator also slowed from 0.4% to 0.3%, in line with expectations, while the year-on-year rate declined slightly from 4.7% to 4.6%.

Personal income increased by 0.4% in May, exceeding expectations of 0.3%, while personal spending slowed from 0.6% to 0.1%, falling below expectations of a 0.2% increase.

• Consumer Confidence Surges in the US: Conference Board and University of Michigan Indexes

Consumer confidence in the United States, as gauged by the Conference Board Consumer Confidence Index, rose from 102.5 to 109.7 in June, surpassing expectations (104) and reaching the highest level since January 2022.

Similarly, the University of Michigan Consumer Confidence Index for June was slightly revised upward from 63.9 to 64.4, reaching the highest level in the past four months. This revision can be attributed to the continued easing of inflation and the resolution of the debt ceiling issue in the country.

• Housing Market Update: S&P/Case-Shiller Home Price Index and New Home Sales

In the housing market, attention was on the April S&P/Case-Shiller 20-City Home Price Index and May’s new home sales and pending home sales data.

The S&P/Case-Shiller 20-City Home Price Index showed a monthly increase of 0.9% in April but experienced a rise in the annual decline rate from 1.1% to 1.7%, extending its downward trend for the second consecutive month.

New home sales, on the other hand, exceeded expectations by registering a 12.2% increase in May, marking the third consecutive month of growth. However, pending home sales declined by 2.7% in May, extending its decline for the third consecutive month.

• Fed’s Focus: Minutes from FOMC Meeting and Future Interest Rate Projections

Looking ahead, the focus in the markets will be on the release of the minutes from the Federal Open Market Committee (FOMC) meeting held on June 13-14. During the meeting, the Federal Reserve kept interest rates unchanged, maintaining the federal funds rate range at 5.00% to 5.25%, in line with expectations.

Median projections for the federal funds rate were revised upward from 5.1% to 5.6% by the end of the year, signaling the possibility of two additional 25 basis point rate hikes by year-end. Rate levels for 2024 and 2025 were also revised upward to 4.6% and 3.4% respectively.

• Manufacturing Sector Signals: S&P Global and ISM Indexes

The final manufacturing Purchasing Managers’ Index (PMI) data from S&P Global for June, along with the ISM Manufacturing Index, will be closely watched on Monday for the latest assessment of economic activity.

Preliminary data indicated a slight decline in manufacturing PMI from 48.4 to 46.3, signaling an increased contraction pace in the manufacturing sector. The services PMI, on the other hand, decreased from 54.9 to 54.1, indicating a mild slowdown in the services sector.

On Wednesday, the final durable goods orders and factory orders for May will be released. The preliminary data for durable goods orders showed a 1.7% increase, surpassing expectations and marking the third consecutive month of growth.

• Trade Balance and Economic Outlook: April’s Export and Import Data

Trade balance data for May will be announced on Thursday, providing insights into the US external trade. In April, monthly exports declined by 3.6% to $249 billion, while imports increased by 1.5% to $323.6 billion. Consequently, the trade deficit for April rose from $60.6 billion to $74.6 billion, reaching the highest level in the past six months.

• Employment Market Insights: JOLTS, ADP, and Non-Farm Payrolls Reports

On Thursday, employment market data will be monitored as it guides the Federal Reserve’s monetary policy. The JOLTS Job Openings for May, the ADP private sector employment report for June, and weekly initial jobless claims will be released.

On Friday, the non-farm payrolls, unemployment rate, and average hourly earnings data for June will be published.

Throughout the week, speeches by Federal Reserve officials will also be closely watched for possible new signals regarding monetary policy.

• Germany and Eurozone Inflation Data: June Preliminary CPI Figures

Germany’s headline Consumer Price Index (CPI) in June showed a monthly increase of 0.3%, surpassing expectations of a 0.2% rise, following a 0.1% decline in May due to a drop in energy and food prices. On an annual basis, the CPI rose from 6.1% to 6.4%, slightly exceeding expectations of a 6.3% increase.

In the Eurozone, the headline CPI increased from 0% to 0.3% on a monthly basis in June, while the annual rate declined from 6.1% to 5.5%. The core CPI, which excludes volatile components, recorded a slight increase from 5.3% to 5.4% in June, slightly below expectations of 5.5%. The core CPI reached a record level of 5.7% in March.

• Germany’s Consumer Confidence Drops, Ending Eight Months of Recovery

The GfK consumer confidence index for July in Germany decreased slightly from -24.4 to -25.4, ending eight consecutive months of recovery. The decline in consumer confidence can be attributed to decreases in economic conditions and income expectations. The negative trend in consumer confidence is expected to continue in the negative territory due to the potential impact of the European Central Bank’s (ECB) interest rate hikes.

• Swedish Central Bank Raises Policy Interest Rate

The Swedish Central Bank increased its policy interest rate by 25 basis points to 3.75%, in line with expectations. This rate hike maintains the highest level since 2008.

• Manufacturing and Service PMI Data Shows Contraction and Slower Growth

On Wednesday, the final Purchasing Managers’ Index (PMI) for the manufacturing sector will provide insights into the overall economic outlook for Europe in June, signaling a contraction below the 50 threshold. The final PMI data for the service sector will also be released on Wednesday.

The June PMI data indicated a continued contraction in the manufacturing sector below the 50 threshold in the Eurozone, suggesting an increase in the pace of contraction.

The PMI data for the service sector revealed a transition from growth to contraction in France and a slowdown in other regions, indicating a deceleration in the service sector. The service PMI declined from 52.5 to 48 in France, from 57.2 to 54.1 in Germany, from 55.1 to 52.4 in the Eurozone, and from 55.2 to 53.7 in the UK, indicating a slowdown in service sector growth.

• Upcoming Economic Indicators for Germany and Eurozone

On Tuesday, Germany will release its external trade figures for May. Factory orders in Germany for May will be announced on Thursday, followed by industrial production data on Friday.

Factory orders had declined by 10.7% in March and recorded a 0.4% decrease in April, signaling a slowdown in production in Germany.

Retail sales data for May in the Eurozone will be released on Thursday, providing insights into the trend of domestic demand. Retail sales have been experiencing a contraction on an annual basis for the past seven months.

Eurozone Producer Price Index (PPI) for May will be announced on Wednesday. In April, the PPI declined by 3.2% on a monthly basis due to ongoing decreases in energy and intermediate goods prices, resulting in a decline from 5.5% to 1% on an annual basis, reaching the lowest level since January 2021.

Speeches by European Central Bank (ECB) officials, including ECB President Lagarde, will also be closely monitored for potential signals regarding the bank’s monetary policy.

• Caixin Services PMI to Provide Insights on Asian Economies

In Asia, the Caixin Services PMI for June, which signals the performance of small and medium-sized enterprises, will be released on Wednesday. The May Caixin Services PMI recorded a slight increase from 56.4 to 57.1, indicating a mild acceleration in the growth of the service sector. It marked the fifth consecutive month of expansion and the second-fastest growth since November 2020. It is expected that the Caixin Services PMI for June will slightly decline to 56.5, indicating a slight slowdown in the sector’s growth.

• Australian Central Bank Meeting and Monetary Policy Decision

The Reserve Bank of Australia’s meeting will be held on Tuesday. In the previous meeting, the central bank unexpectedly increased the policy interest rate by 25 basis points to 4.10%, while market expectations were for no change. The bank had also mentioned the possibility of further tightening of monetary policy to ensure inflation returns to the target level. It is expected that the central bank will increase the policy interest rate to 4.35% in this week’s meeting.