Details for the day ahead - TDS

Analysts at TD Securities explained their outlook for the day ahead.

Key Quotes:

"INR CPI will benefit from a high base in August 17 and as such we expect a small decline to have been registered in the pace of inflation in August 18. Our forecast of 4.13% y/y in August from 4.17% y/y in July would mark the lowest y/y CPI rate since October 17. Limiting the decline in inflation will be a renewed increase in oil and energy prices and renewed pressure on the INR."

ZAR July retail sales growth is expected at 1.6% Y/Y up from the prior 0.7%. Growth has been weakening since the start of the year as a result of the VAT increase and other tax changes, weak employment growth, and subdued growth in credit extension to households.

AUD Employment gains are starting to face headwinds after two years of breakneck additions. The three leading employment indicators point to 2-2½%/y employment growth, and so our expected 'seasonal' August dip (TD -10k, mkt +18k) is unlikely to be the start of renewed weakness. As employment and hours' worked were so strong last year, all annual growth rates suffer from adverse base effects. We look for the unemployment rate to pip higher to 5.4% (mkt 5.3%) on an unchanged participation rate of 65.5% (mkt 65.6%). Adding to the sour tone, we look for a correction in full-time employment as well (-20k).

GBP We and the unanimous consensus expect an uneventful MPC policy decision at noon BST, with policy left on hold and no reason to signal risks to the recent August forecast. See here for our BoE Preview and Trading the BoE notes. The MPC is likely content with incoming data, with July GDP and the labour market both showing continued momentum. With one hike expected next year, they're also likely happy with the yield curve through 2019. For now, the MPC will remain on the sidelines, until Brexit uncertainty is resolved in the next 6 months or so. Note that this is MPC meber Jonathan Haskel's first meeting as a policymaker.

EUR The ECB decision at 12:45 BST and press conference at 1:30pm should be somewhat more eventful than the BoE decision. See our ECB Preview and Trading the ECB notes. We expect the Governing Council to confirm a taper to €15bn/mo in 2018Q4, but to leave a full stop of QE thereafter conditional on inflation developments and the inflation forecast in December. We expect no change to the rates guidance. Alongside the press conference, new projections will be released. Yesterday's leaks confirm our priors that the inflation forecast is likely to remain unchanged, but the growth forecast will be revised down slightly, with downside risks flagged on EM uncertainty.

TRY There is a lot of uncertainty about today's CBRT rate decision. The Bloomberg consensus is looking for for the benchmark one-week repo rate to be hiked from the current 17.75% to 21%, with individual forecasts ranging from 17.75% to 25.0%. We think the CBRT will want to do more than the consensus, and will hike the one-week repo rate to 22.0%. On the face of it this would be a 425bps hike. However, the Weighted Average Cost of Funding (WACF), which better expresses the overall stance of monetary policy, would be lifted to 22% from 19.25% now, making a less aggressive increase of 275bps. Will this be enough to placate the market for now? Possibly, but long-term stability is another matter entirely. As the pass-through of weak lira into CPI advances, inflation will reach (and very likely breach) the 20% mark and we continue to forecast the WACF at around 30% before year-end.

CAD New home prices for July are projected to rise 0.1% m/m by the market, which would leave prices up just 0.5% y/y (from 0.8%) in further evidence of fading shelter price inflation.

USD TD is on-consensus for CPI inflation to edge lower to 2.8% y/y, with prices up 0.3% m/m on energy and a 0.2% m/m increase in the core, offset by weaker food prices. This should leave core inflation unchanged at 2.4% y/y (market: 0.2% m/m, 2.4% y/y), although we view risks as tilted to the upside for both headline and core. Initial jobless claims for the week of September 8 are expected to rebound to 210k by the market while a 13:00 ET speech by Atlanta Fed President Bostic will round out the calendar."