The Week Ahead

During the week ahead the market is likely to look towards a number of key market themes and events which have the potential to indicate financial market moves.

The economic calendar is jammed packed with important events and releases this week. The release of the US bank stress test, final GDP numbers, and inflation data from the US headline.

US core PCE

The core PCE deflator data is going to be a key event this week as it could give some clues as to whether the Fed will hike interest rates two more times this year as expected. It is a significant indicator of inflation watched by the Federal Reserve.

The Core Personal Consumption Expenditures released by the US Bureau of Economic Analysis is an average amount of money that consumers spend in a month. “Core” excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure.

When the core PCE deflator figures were released in April, headline inflation edged up from 4.6% to 4.7%, while the deflator itself pushed up to 4.4% from 4.2%. Expectation is for 0.4% monthly reading and year on year 4.6%.

UK mortgage approvals

The Mortgage Approvals released by the Bank of England presents the number of various Mortgage Approvals. It is considered as a leading indicator of the UK Housing Market. A Mortgage growth represents a healthy housing market that stimulates the overall UK economy.

Following the recent 50 basis point interest rate hike by the Bank of England there is some concerns about the state of the UK housing market. This is with just cause.

Inflationary pressures are still apparent, plus the increase in wages is prompting concern over higher rates and higher mortgage costs in the coming months.

Given current levels of uncertainty, hike cycle, we may see a sharp decline, while net lending may decline further, after April lending fell by -£1.4bn, the weakest number since July 2021.