By ForexTime
Various asset classes, from FX to stocks, have been swayed by how central bankers are going about trying to tame surging global inflation.
That theme will continue to be the focus in the coming week:
Monday, August 15
- JPY: Japan 2Q GDP, June industrial production (final)
- CNH: China July industrial production, retail sales, jobless rate
Tuesday, August 16
Free Reports:
Sign Up for Our Stock Market Newsletter – Get updated on News, Charts & Rankings of Public Companies when you join our Stocks Newsletter
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
- GBP: UK June unemployment rate, July jobless claims
- EUR: Eurozone August ZEW survey expectations
- USD: US July industrial production
- Walmart Q2 earnings
Wednesday, August 17
- NZD: RBNZ rate decision
- GBP: UK July CPI
- EUR: Eurozone 2Q GDP, unemployment
- USD: FOMC minutes, US July retail sales
- US crude: EIA weekly oil inventory report
- Tencent 2Q earnings
Thursday, August 18
- AUD: Australia July unemployment
- EUR: Eurozone July CPI (final print)
- USD: US weekly jobless claims; speeches by Kansas City Fed President Esther George and Minneapolis Fed President Neel Kashkari
Friday, August 19
- NZD: New Zealand July external trade
- JPY: Japan July National CPI
- GBP: UK July retail sales, August consumer confidence
- CAD: Canada June retail sales
For the UK’s July consumer price index (CPI), markets are forecasting a year-on-year print of 9.9%.
If so, that would mark the fastest advance in UK inflation since the 10.2% print back in February 1982.
Though keep in mind that the Bank of England (BOE) had already forecasted double-digit inflation to arrive by October, hence it’ll be no surprise if the CPI print continues moving higher.
A higher-than-expected headline inflation print next week may not be enough to even prompt markets to significantly raise their bets that the Bank of England can proceed even with a 50-basis point hike at its September meeting.
- A week ago, the odds of a 50bps hike in September was placed at 95.3%.
- At the time of writing, markets are forecasting a 77% chance that the BOE can even follow through with such a “2-in-1” hike (rate adjustments by major central bankers are traditionally carried out at 25bps per policy meeting).
Markets have walked back bets of the BOE being overly aggressive with its rate hikes, given the cracks that are already showing in the UK economy:
- Q2 GDP shrank 0.1% compared to Q1 (though slightly better than the -0.2% median estimate)
- Industrial production fell 0.9% in June (second month-on-month contraction from the past 3)
- Q2 private consumption contracted by 0.2% compared to Q1
- Q2 imports fell by 1.5% quarter-on-quarter
Overall, it’s difficult to retain any optimism about the UK economic outlook, considering the ongoing cost of living crisis.
And the widely-held consensus is that the worst is yet to come, with a recession looming.
Such a woeful outlook, with the BOE already expecting a recession by the end of this year, is set to cap significant upside for the Pound.
Sterling has weakened against all of its G10 peers this week, except versus the US dollar.
While GBPUSD has found support at its 21-day simple moving average in recent sessions, upside appears capped around the 1.24 mark.
Should we see a resurgence in the US dollar in the coming week, perhaps fuelled by fresh hawkish clues out of the FOMC minutes or the scheduled speeches by Fed officials, that might see GBPUSD falling below its 21-day SMA and retesting the psychologically-important 1.20 level.
Weaker-than-expected UK jobs data, consumer confidence, and retail sales in the coming week could also prompt GBPUSD to revisit recent lows.
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
- COT Bonds Charts: Speculator Bets led by SOFR 3-Months & 10-Year Bonds Dec 21, 2024
- COT Metals Charts: Speculator Bets led lower by Gold, Copper & Palladium Dec 21, 2024
- COT Soft Commodities Charts: Speculator Bets led by Live Cattle, Lean Hogs & Coffee Dec 21, 2024
- COT Stock Market Charts: Speculator Bets led by S&P500 & Russell-2000 Dec 21, 2024
- Riksbank and Banxico cut interest rates by 0.25%. BoE, Norges Bank, and PBoC left rates unchanged Dec 20, 2024
- Brent Oil Under Pressure Again: USD and China in Focus Dec 20, 2024
- Market round-up: BoE & BoJ hold, Fed delivers ‘hawkish’ cut Dec 19, 2024
- NZD/USD at a New Low: The Problem is the US Dollar and Local GDP Dec 19, 2024
- The Dow Jones has fallen for 9 consecutive trading sessions. Inflationary pressures are easing in Canada. Dec 18, 2024
- Gold Holds Steady as Investors Await Federal Reserve’s Rate Decision Dec 18, 2024