The sudden shift to central bank hawkishness certainly ruffled the feathers of global markets this week.

Wall Street recovered some ground on Friday, Europe didn't. Futures markets point to the ASX recovering a bit from the $28 billion mauling it received at the end of the week.

Markets on Friday's close: ASX SPI 200 futures +0.4pc at 5,670

ASX SPI 200 futures +0.4pc at 5,670 AUD: 76.86 US cents, 67.26 euro cents, 59.01 British pence, 86.38 Japanese yen, $NZ1.05

AUD: 76.86 US cents, 67.26 euro cents, 59.01 British pence, 86.38 Japanese yen, $NZ1.05 US: Dow Jones +0.3pc at 21,350, S&P500 +0.2pc at 2,423 NASDAQ -0.1pc at 5,647

US: Dow Jones +0.3pc at 21,350, S&P500 +0.2pc at 2,423 NASDAQ -0.1pc at 5,647 Europe: FTSE -0.5pc at 7,313 DAX -0.7pc at 12,325 Eurostoxx50 -0.9pc at 3,442

Europe: FTSE -0.5pc at 7,313 DAX -0.7pc at 12,325 Eurostoxx50 -0.9pc at 3,442 Commodities: Brent oil +1pc at $US47.92/barrel, Gold -0.3pc at $US1,241/ounce, Iron ore +0.4pc at $US64.97/tonne

While it felt like a fairly ugly week locally, the ASX was one of the few global markets to make a gain, albeit marginal.

The 0.1 per cent rise over the week was largely thanks to the unexpected commodities rally which saw iron ore jump 14 per cent, while oil was up 3 per cent.

Wall Street slipped 0.6 per cent and Europe was down 2.6 per cent.

While the cauldron — or more correctly, kettle — of hawkishness bubbled up in the US, Canada and Britain, Europe lit the flame.

"Most significantly, uber-dove (ECB president) Mario Draghi suggested that deflationary forces [in Europe] have been replaced by reflationary ones," BetaShares chief economist David Bassanese noted.

Mr Bassanese argued the move to raising rates should be embraced, not feared.

"A broadening in monetary policy normalisation across the world would be a very healthy development.

"Despite persistent low inflation, the steady decline in unemployment rates in Europe, the United States and Japan suggest 'emergency' policy settings are clearly no longer needed."

Market prices no rate hike now, but one next year

So will the RBA take flight with the hawks at the board meeting on Tuesday? Probably not.

Futures trading has priced in only a 2 per cent chance of a cut. Longer term, the betting is the next movement is up, with a full 25 basis point rise priced in by around October next year.

According to the futures market, the next move from the RBA will be up with a full 25 basis point hike priced in for around October 2018. ( Source: ASX )

Deutsche Bank's Adam Boyton said there was some scope for the RBA to tinker with its statement to edge to the hawkish side of the fence from its neutral stance, but it was probably not ready yet.

"If there are shifts these can, in our view, only be in the hawkish direction," Mr Boyton said.

"Despite what the Bank does in the statement next week, our own views on the outlook for the cash rate are unlikely to change.

"We doubt the Bank would move rates ahead of seeing some broader signs across wages, GDP growth and inflation that the economy was panning out as they expect."

Higher mortgage rates buy the RBA more time

UBS economist Scott Haslem shares that view, but argued a fair bit of the RBA's work was being done for it by the banks' out-of-cycle lifting of rates.

"The RBA still clearly has the most influence over monetary policy in Australia, with a direct influence on borrowing rates via changes in the cash rate," Mr Haslem said.

The RBA pulled the emergency rates lever in the aftermath of the GFC. The banks have been less generous.

The gap between the RBA and the average, economy-wide private sector borrowing rate has doubled since 2007 to around 350 basis points.

The difference is even larger for property investors on interest-only loans.

Since the GFC, mortgage rates have increasingly diverged from the RBA's cash rate. ( Source: UBS )

APRA's demand the banks for the banks to throttle back on riskier property loans is targeted, and works out nicely for the RBA.

"It appears likely monetary policy will continue to target housing through macroprudential measures (driven by APRA), rather than the RBA using the blunt tool of cash rate hikes," Mr Haslem said.

"Hence, the 'structural' widening of borrowing rates versus the RBA — combined with record leverage — argues that the long-run 'neutral' cash rate in Australia is likely now lower at around 2.75 per cent (not 3 per cent as previously assumed)."

In other words, the RBA is in less of a rush to start its hike back to "normal" as it is that much easier to get there.

Key housing, retail and trade figures out

The economic calendar is pretty busy this week, with readings across property, retail, manufacturing and trade.

Monday sees the release of the RP Data-Core Logic house price index, which has of late pointed to a definite cooling in the market. Building approvals are out too, and while volatile, the focus will be on the apartment sector.

Retail sales — which has become a something of weakness in the economy, allied to low wage growth and high household debt — will be out on Tuesday.

The trade balance on Wednesday should show another surplus. Not the giddy heights expected earlier in the year, but better than entrenched deficits of previous years.

AiG spreads its industry-focused surveys over the week, starting with manufacturing (Monday), then services (Wednesday) and construction (Friday).

Trump and Putin: the main event

Overseas, the minutes of the Federal Reserve and ECB should make for interesting reading, given what appears to be a coordinated approach from the big central banks to raise expectations that rates are going up.

The key things from the Fed's musings will be how it looks through persistently low inflation and still feel comfortable raising rates and whether there are any more insights into concerns about rather frothy equity markets.

In Europe, after the debate about what ECB boss Mario Draghi meant last week, markets will be looking for greater clarity whether the banks stands with the hawks or doves.

However, the highlight of the week may be at the G20 summit in Germany, where US President Donald Trump is set to meet Russian President Vladimir Putin. The undercard is German Chancellor Angela Merkel meeting China's President Xi Jinping.

In China, the unofficial manufacturing survey — the Caixin PMI, which focuses more on small to medium enterprises than the official PMI — is out on Monday.

The previous reading was contractionary. It will be interesting to compare it with the state-controlled PMI from last week which was surprisingly strong.

The key numbers in the US are on Friday — jobs and wages.

Non-farm payrolls are expected to have grown by 180,000 in June, the unemployment rate steady at 4.3 per cent and wages may have edged up a tad.

Australia

Date Event Forecast Monday 3/7/17 Manufacturing index Jun: AiG series, activity has been expanding solidly Building approvals May: Very volatile, up in April, tipped to fall this time House price index Jun: Fell 1pc previously, could be interesting with investor interest cooling Job ads Jun: ANZ series, employment growth has been strong Tuesday 4/7/17 RBA rate decision No change with rates held at 1.5pc Retail sales May: Unexpected strength in April, likely to cool again Wednesday 5/7/17 Services index Jun: AiG series, expanding steadily Thursday 6/7/17 Trade balance May: $1bn surplus expected Friday 7/7/17 Construction index Jun; AiG series, should be expanding

Overseas