What to watch

There will be two main focuses to this morning's session:

• Flash PMI data: This morning will see prints from France, Germany, the Eurozone and the UK while the US print is due this afternoon. For all the European/UK prints, a modest decline of 0.5-1.0 points is expected. There will be particular focus on the UK services print, given the large fall seen in last month's print. These prints will be watched by the ECB and BOE, but will likely need to see surprises of at least a couple of points to really see much of a lasting move. There is still a lot of hikes priced into markets so the bar to pricing in more on PMI data is relatively high, but on the flip side its already known the economy is likely to be slowing, so a small miss is also unlikely to really derail any near-term hiking intentions.
• Norges Bank: Markets are more than fully pricing a 25bp hikes, with a 50bp hike a very real possibility for today's meeting. While inflationary pressures, rates among trade partners and firm oil prices argue in favour of a more sizeable 50bps hike this month, the MNI Markets team thinks that the board are likely to stick to their predictable, steady, “gradual” 25bps due to a unique transmission mechanism and a firm preference for credibility-driven policy. To counter any ‘dovish’ messages of a 25bps hike this week, the board will likely steepen their path projections further this quarter, introducing – for the first time this cycle – the likelihood of rate hikes at inter-policy report meetings. The bank could reinforce this message by stating that the next rate hike “will likely” follow in August. For the MNI Norges Bank Preview click here.
• Elsewhere today we will also have CBI distributive trends data, jobless claims data and the second round of Powell's semi-annual testimony.