Neil DennisUK rate-watchers at full attention please: inflation data is under the spotlight for signs of consumer prices peaking ahead of what the Bank of England hopes will be a dip back towards target levels.
The consumer price index (CPI) for June is published on Tuesday, along with the retail price index (RPI) and data on producer prices – a measure of inflation at the input level.
CPI rose by an annual 2.9% in May, a 0.1 percentage point premium on the Bank of England's first quarter Inflation Report forecast that consumer prices would peak at 2.8% late in the year.
June's annual CPI is expected to push up to 3%, further extending the gap in real wages as annual average earnings growth – published last week – slipped further to 1.8% in May from 2.1% in April.
With the inflation hawks at the BoE now numbering three out of the nine Monetary Policy Committee members, the central bank's interest rate dilemma deepens.
Do they soon act – lifting rates to stem inflation – or do they wait to see some improvement in wage growth?
"The wage squeeze being endured by millions of Britons has turned into a clear and present danger for the economy," says Mariano Mamertino, EMEA economist at the global job site Indeed.
Pricing pressures on manufacturers is starting to ease, as shown by May producer price data, where input costs – raw materials, services, etc – and output – also known as factory gate inflation – fell from April's levels.
How near is the European Central Bank to removing monetary stimulus? ECB policy meeting on Thursday - Source: Max PixelEurozone interest rate decision
The question on Thursday is: how near is the European Central Bank to tightening monetary policy?
It sounds increasingly hawkish, but few expect interest rates to move any time soon. Instead, the first move from the ECB is likely to be paring back its monthly asset purchases under its QE operations.
Such a move was hinted at in the minutes of the central bank's last policy meeting, although it is not expected to be announced at this week's policy meeting.
Tom Elliott, investment strategist at deVere Group,says: "The direction of travel for the central bank’s monetary policy is changing."
He adds: "But the pace of that change is likely to be glacial, given weak regional inflation pressures and a desire to avoid repeating the premature rate hike of 2011."
Haruhiko Kuroda: The Bank of Japan governor continues to try to stimulate price growth: BoJ policy meeting on Thursday - Source: Wikimedia CommonsBoJ interest rate decision
The Bank of Japan's interest rate decision on Thursday will be much easier as inflation remains well below the central bank's target rate.
Almost 60% of analysts polled by Reuters expect the BoJ to start tightening monetary policy by the end of 2018, but that leaves 40% believing rates will be on hold for longer.
Markets are certainly not pricing in any rate moves in the near future. Japanese government bond yields are negative up to the five-year maturity, and even the 10-year bond only yields 0.07%.
The central bank's main rate stands at -0.1%, as it has since January 2016, and no change is expected on Thursday.
Coronavirus affects markets
"We think the central bank will keep policy unchanged until at least 2020 as inflation is likely to remain well below its 2% target," says John Higgins at Capital Economics.
Shanghai has become the symbol of China's rapid economic expansion since the 1990s - Source: WikipediaGrowth in China
A swathe of data released in China at the beginning of the week is capped by gross domestic product growth for the second quarter.
The quarterly growth rate slowed to 1.3% in the first quarter from 1.7% in Q4 last year, but this was robust enough to push the annualised rate up to 6.9% from 6.8%.
This was its strongest growth rate in six quarters thanks to a continuing property boom and as government infrastructure spending increased.
Analysts expect some of this support to have dwindled in the second quarter, however, and the annual growth rate is seen dipping back to 6.8%.
Philadelphia Federal Reserve building: Philly Fed manufacturing survey published on Thursday - Source: Wikimedia CommonsUS regional manufacturing indexes
Two of the Federal Reserve's big industrial districts report key manufacturing indexes this week.
First up on Monday is the Empire State Manufacturing report from the Fed's New York district, which bounced back strongly to a two-year high of 19.8 in June from -0.1 in May, reflecting strong gains in new orders, shipments and inventories.
Analysts expect a slight backward move to 15 for July, but this still represents a strong pace of growth.
The Philly Fed survey of manufacturing in the Philadelphia district has experienced similar growth in recent months – coming in at 27.6 in June.
Although this was down from May's 38.8, the June survey beat analysts’ forecasts and continued to report robust levels of new orders and jobs growth. July's index is expected to retreat a little further, to 22.9.
Best of the rest
Lots of housing data out this week: in the US on Wednesday look out for mortgage applications, building permits and housing starts figures. In the UK, the week starts with the Rightmove house price index.
On Thursday, UK retail sales are expected to show some recovery in June after falling to an annualised growth rate of 0.9% in May, from 4.2% in the previous month.
In Germany on Tuesday, ZEW the economic institution publishes its influential measure of investor sentiment in the eurozone's most powerful economy. June's index pushed up to 37.7 from 35.1 in May.
Earnings
Many high profile companies reporting this week: In the UK, quarterly results on Tuesday from Rio Tinto, Thursday sees easyJet and Unilever and Friday brings a trading update from Vodafone.
Bank reporting season continues in the US: On Tuesday, Bank of America and Goldman Sachs, Wednesday sees First Bancorp, Morgan Stanley and AmEx and Thursday is Bank of New York Mellon.
Also in the US is IBM and Johnson & Johnson on Tuesday and Microsoft on Thursday.
