MNI GLOBAL WEEK AHEAD - France 2nd Round, US CPI and Central Banks

French voters go to the polls for the second time in a week on Sunday 7 July in the second round of the legislative elections. The right-wing nationalist Rassemblement National (National Rally, RN) is on course to emerge as the largest party in the National Assembly, with seat range estimations putting the party between 190-250 seats. This would be short of the majority threshold of 289 in the 577-member legislature. The ‘republican front’ effort by the leftist New Popular Front (NFP) and the centrist Ensemble bloc of President Emmanuel Macron – where NFP candidates have stood down in three-way contests if they are in third place in order to avoid splitting the anti-RN vote with Ensemble (and vice versa) – looks set to deny the RN of Jordan Bardella and Marine Le Pen an overall majority.

Monday - BOE Speeches

After the election communications blackout for the BOE, the week ahead sees three MPC speakers scheduled. On Monday Haskel will kick off the week with a speech at 17:15BST entitled "What's done and what's to come", to be delivered at ESCoE/Kings College London. His last meeting will be in August (and this is his second term so he cannot be renewed). Note that he is amongst the most hawkish MPC members so we wouldn't expect him to be hinting at cuts at this stage (if he does that is a very dovish sign). Huw Pill will speak at Asia house on Wednesday 10 July at 14:30BST. Pill is generally seen as the most hawkish of the internal members - if he strikes a more dovish tone it would likely be interpreted as a dovish shift for all of the internal members and increase the probability of an August cut. In our view this is the most important currently scheduled UK event of next week. Mann will appear on a panel on business investment, also on Wednesday 10 July in Manchester. She has been one of the most hawkish MPC members for some time, but her stance seemed to have softened a little in recent speeches. The panel is not directly covering monetary policy, but she is normally forthright with her views when she is asked (even if it is slightly off topic) and it will be interesting to see whether she is still some way from considering voting for a cut. In addition to these three scheduled appearances, there is a good chance that some of the other MPC members conduct media interviews after the election blackout period ends in the two weeks ahead of the quiet period for the August MPC meeting beginning.

Tuesday/Wednesday - Powell's Semiannual Testimony

Fed Chair Powell speaks in front of the Senate Banking and Housing Committee for the semiannual testimony on Tuesday, starting at 1000ET (and again to the House on Wednesday). His prepared remarks will be watched closely having opted to stick to the prior script at his Sintra appearance on Jul 2. Back at the Jun 12 FOMC press conference, Powell provided guarded optimism that the FOMC would receive further good news on inflation like the fresh May CPI report, but at this stage more is required to meet the "test" for cutting rates (the other "test" is an "unexpected deterioration in labor market conditions"). Friday’s nonfarm payrolls report delivered a sweep of dovish surprises. The unemployment rate rising further to 4.05% probably doesn’t meet an “unexpected” deterioration on its own (which Powell has previously indicated needs to be more than a couple tenths), but the trend is starting to be more notable having increased two tenths over the latest two months and is already above where the median FOMC participant sees it ending 2024.