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

• 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.