The Most Important Week of the Summer Is Here

investing.com:

This will be one of the busiest weeks of the year, with a flood of economic data, an FOMC meeting, an ECB meeting, and a BOJ meeting. On top of that, there will be earnings from 3 of the big seven.

The Fed meeting will undoubtedly get all the attention, but the BOJ meeting may have the most significant impact. Expectations for this week’s BOJ meeting have been all over the place for the past week or two. At one point, investors thought the BOJ might look to ease back on its yield curve control and lift the 50 bps limit on the 10-year JGB.

That caused the Yen to strengthen, and then rumors were floating there would be no change to YCC at this week’s meeting, which caused the Yen to weaken. If the BOJ chooses to lift the cap on the Japan 10-Year bond, that would not only cause the Yen to strengthen; it would result in the 10-year rate moving higher not just in Japan, but you would probably see global rates push higher, as a result.

Currently, the 10-year JGB is capped at 50bps.

The Fed

While significant uncertainty exists around the BOJ, the market is confident that the Fed will lift rates this week by another 25 bps. The odds for a July hike are now sitting at 96%. The biggest question will then be what the Fed will do next, and my general thought is that the Fed is not done and will have at least one more rate hike to come, if not more, depending on the data.

Earnings

Earnings season will take another step up this week, and so far, earnings have been okay. This quarter’s sales and earnings surprises have been weaker than in the first quarter. This quarter, sales have surprised by 1.82% vs. 2.58% last quarter, while earnings surprised by 6.2% versus 6.6% last quarter.

Meanwhile, earnings estimates for 2023 have dropped