Watch out for Philadelphia Fed’s manufacturing survey

Renta 4| New day with European futures lower at the open (Eurostoxx 50 -0.6%, S&P flat) after a negative close in the US at the lows and with the US IRR 10 hitting the highest since October at 4.26%, and rising today +4 bps to 4.31%, which is an increase of c.+15 bps since Friday.

Noteworthy is the publication of the minutes of the Fed’s July meeting where there is no consensus within the institution on the direction monetary policy should take. Several members voted in favour of maintaining rates, given the risks that exist as a consequence of having raised interest rates so quickly. The document expresses the Fed’s concern about the resilience of inflation and that prices will not normalise, warning that there are upward pressures on prices, and that the implementation of such a restrictive monetary policy could lead to a sharper slowdown in economic growth. From all that was discussed, the intention, also expressed by several members, to continue to reduce the balance sheet even when the rate hike cycle ends and to start cutting rates, also stood out.

Of note yesterday’s UK price data for July, with the headline rate moderating more than 1pp to +6.8% year-on-year (explained by energy prices), but the core rate remaining tight, stable vs. June at +6.9%. These figures show a price environment still under pressure and suggest that the Bank of England could raise rates again in September, currently at 5.25% and with the market discounting a rate of 6% by early 2024.

On the macroeconomic front, the July trade balance was released today, with exports falling for the first time in two and a half years (-0.3% vs. -0.8%e and +1.5% previously) while imports declined -13.5% (vs -14.7% est.). In the US, the Philadelphia Fed’s manufacturing survey for August could show a further deterioration vs. the previous month (-13.5 year-on-year (-13.5 year-on-year and -10 est.).

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