The week ahead: 19 - 23 August 2024

United States – Wednesday sees the release of the July Fed minutes. In the press conference, Powell confirmed a rate cut had already been discussed for the July meeting. Markets will be looking for the tone and arguments in that discussion to gain greater insight into the upcoming meeting. Considering the market reaction to the latest figures, the discussion on the labour market and its claimed 'normalization' will be particularly important. Thursday marks the release of the S&P Global PMIs, where we expect the manufacturing to come in above 50 again, and Services to settle at a slightly lower, but still high, level.

Eurozone – On Thursday PMIs are released for the eurozone economy as well as for France and Germany. We expect the PMIs to reflect the ongoing divergence between strength in services and weakness in manufacturing. Over the past three months the eurozone composite PMI showed a clear weakening trend ending at 50.2 in June. August PMIs are expected to roughly stabilize but may tip the composite eurozone PMI below the neutral mark.

China – The cuts in several policy rates in July was in line with our view that the PBoC would resume piecemeal monetary easing now we move closer to the first Fed rate cut (which we expect in September). We see room for further mini rate cuts and RRR cuts going forward. Meanwhile, the PBoC is redeveloping its monetary toolkit to make it more market-oriented, with a greater role for the short-term 7 day reverse repo rate. In line with consensus, we do not expect another cut in the 1-year loan prime rate on Tuesday yet. Normally, the LPRs set by commercial banks follow the rates of the PBoC’s 1-yr medium-term lending facility, and the PBoC has shifted the MLF rate setting meeting to 26 August (from 15 August).