Weekly Market Outlook – We anticipate that the minutes from the July gathering of the Federal Open Market Committee (FOMC) will maintain a hawkish outlook. The Federal Reserve is likely to be cautious about indicating a rapid increase in US interest rates, as the markets seem to be wholeheartedly embracing the idea of a gradual economic slowdown. Shifting our focus to the UK, we can look forward to the release of inflation and wage data.
What to watch on the Economic Calendar this week:
* - Important
Monday, August 14:
- NZD: BusinessNZ Services Index
Tuesday, August 15:
- JPY: Prelim GDP Price Index y/y
- JPY: Prelim GDP q/q
- AUD: Monetary Policy Meeting Minutes*
- AUD: Wage Price Index q/q*
- CNY: Industrial Production y/y*
- CNY: Retail Sales y/y*
- CNY: Unemployment Rate
- GBP: Claimant Count Change*
- GBP: Average Earnings Index 3m/y*
- GBP: Unemployment Rate
- EUR: German ZEW Economic Sentiment*
- CAD: CPI m/m*
- USD: Core Retail Sales m/m*
- USD: Empire State Manufacturing Index*
- USD: Retail Sales m/m*
- GBP: CB Leading Index m/m
- USD: FOMC Member Kashkari Speaks
Wednesday, August 16:
- NZD: Official Cash Rate*
- NZD: RBNZ Monetary Policy Statement*
- NZD: RBNZ Rate Statement*
- NZD: RBNZ Press Conference*
- GBP: CPI y/y*
- GBP: PPI Input/Output m/m
- GBP: RPI y/y
- GBP: HPI y/y
- EUR: Flash Employment Change q/q
- EUR: Flash GDP q/q
- EUR: Industrial Production m/m
- USD: Building Permits*
- USD: Industrial Production m/m*
- USD: Crude Oil Inventories
- USD: FOMC Meeting Minutes*
Thursday, August 17:
- NZD: PPI Input/Output q/q
- JPY: Trade Balance
- AUD: Employment Change*
- AUD: Unemployment Rate*
- NZD: RBNZ Statement of Intent*
- EUR: Trade Balance
- USD: Unemployment Claims*
- USD: Philly Fed Manufacturing Index*
- USD: CB Leading Index m/m
Friday, August 18:
- GBP: GfK Consumer Confidence
- JPY: National Core CPI y/y
- GBP: Retail Sales m/m*
- EUR: Final Core CPI y/y
- EUR: Final CPI y/y
- CAD: IPPI m/m
- CAD: RMPI m/m
Stay up to date with the Global Economic Calendar and never miss out on crucial updates, upcoming events, significant announcements, and important data releases!
Economic data highlights scheduled for August 14 week:
In the upcoming August 14 week, significant economic data will impact the Federal Reserve’s monetary policy outlook, though more data will follow before the September 19-20 FOMC meeting. With over a month until then, predicting outcomes is premature. The low 3.5% unemployment rate in July indicates a tight labor market. Despite July’s CPI showing a month-to-month inflation decrease, the 3.2% annual rate remains above the Fed’s 2% target.
Minutes of the July 25-26 FOMC meeting will be released on Wednesday at 14:00 ET, offering limited insight given discussions that occurred before the CPI release and upcoming data. Policymakers aim to curb inflation, forecasting one more 25 basis point fed funds rate increase this year. Uncertainty surrounds the economic outlook, prior rate hike effects, and geopolitical events impacting the September rate increase possibility.
Key economic data includes July retail sales at 8:30 ET on Tuesday, affected by expensive gasoline, summer travel, and Amazon’s Prime Day impact. Mortgage rate hikes might affect August’s NAHB/Wells Fargo housing market index at 10:00 ET on Tuesday, as existing unit stock remains low while potential homebuyers decrease per MBA mortgage application data. The new single-family home sales’ pace should stay strong until prequalified buyers adjust to higher rates.
United States/USD: Traders focus on Retail Sales & Fed Minutes
After the July CPI data fell below expectations, investors believed the Fed would avoid further rate hikes. They thought a reduction of around 130 basis points might be appropriate for next year. This kept the euro/dollar uptrend going, despite the US dollar’s strength since July 18. The pair recovered somewhat from the upward trend line drawn since September 26.
During the recent FOMC meeting, Fed Chair Jerome Powell stated that decisions would be made step by step, closely tied to economic data. He mentioned the possibility of a September hike depending on data, but also the option to keep rates steady.
Considering this, upcoming data like Tuesday’s retail sales and Wednesday’s industrial production for July hold significance. They could determine if the dollar will recover strongly. Both headline and excluding-auto sales are expected to accelerate to 0.4% month-on-month from 0.2%. Industrial production is predicted to rebound by 0.3% month-on-month after a 0.5% contraction.
While these releases might not drastically shift the market’s view on the Fed’s rate path, they could contribute to hopes of a gentle economic adjustment. If Wednesday’s meeting minutes reveal that a notable number of policymakers favored more hikes before ending the tightening cycle, this might lead investors to reconsider the likelihood of a September hike.
Considering the US Treasury’s commitment to issuing more bonds, this could push yields and the dollar higher. Concurrently, stocks could extend their recent decline. Conversely, weaker-than-expected data coupled with meeting minutes implying Fed officials’ skepticism about additional hikes could result in the opposite outcome.
United Kingdom/GBP: UK Inflation & Wage Data will guide BoE
The Bank of England is closely monitoring services inflation and wage data to determine the need for further rate hikes. A potential September pause is not ruled out, and avoiding a November hike depends on data improvement. Here’s what we anticipate in the upcoming week:
Jobs/Wages (Tuesday): The job market is cooling, showing signs of better worker supply. There’s a risk of a 0.1pp increase in the unemployment rate. Private sector wage growth is expected to remain at 7.7%, slowly declining to around 6% by year-end, as per both our and BoE’s forecasts.
Inflation (Wednesday): Due to a nearly 20% decrease in household energy bills, headline inflation likely dropped over one percentage point. Improved food inflation should contribute too. BoE predicts a slight rise in services CPI from 7.2% to 7.3% YoY. We, however, anticipate services inflation to stay flat or decrease slightly, aligning with our view of a solitary rate hike.
Retail Sales (Friday): July’s wet weather might weaken retail sales after June’s positive figures driven by warmer conditions. Currently, retail figures hold little significance for the Bank of England, which is primarily focused on inflation.
Canada/CAD: Inflation data affect Canadian Dollar prospects!
Despite the robust recovery in oil prices, the Canadian dollar has recently been under pressure. It appears that due to declining risk appetite and a strong US dollar, traders refrained from considering an investment in the Canadian dollar.
However, an opportunity for reassessment regarding this currency’s prospects will arise on Tuesday, with the release of Canada’s CPI data for July. Given the recent strong rebound in year-on-year oil price changes, there is a possibility that the headline CPI rate might recover from its current 2.8% y/y level.
Should the core rate also experience a significant increase, the likelihood of the Bank of Canada implementing another rate hike at their September meeting could rise from the present approximately 20%, thereby offering some level of support to the Canadian dollar. Conversely, a slowdown in inflation could lead to the opposite scenario.
New Zealand/ NZD: Kiwi exposed to risk sentiment as RBNZ stays mute!
The RBNZ is set to meet on Wednesday. It’s highly likely they will remain neutral, as the chance of a rate hike is just 4%. In May, the Bank indicated it wouldn’t raise rates anymore, and in July, it stayed on the sidelines due to high interest rates dampening spending as expected.
Given that the Q2 CPI rate dropped to 6.0% from 6.7%, this meeting probably won’t lead to major changes. The decrease in inflation aligns with previous decisions made by officials.
Consequently, it’s doubtful that there will be significant volatility in the Kiwi due to this choice. Instead, its sensitivity might be more tied to overall market sentiment and particularly developments concerning the Chinese economy.
Japan/JPY: Wage Growth, GDP, and CPI Impact
Throughout the entire week, the yen has faced downward pressure due to the slowdown in Japan’s wage growth, potentially dampening expectations of the Bank of Japan’s (BoJ) future tightening measures. On Tuesday, the initial GDP figures for Q2 will be unveiled, with forecasts indicating a slight increase to 0.8% quarter-on-quarter from 0.7%.
Nonetheless, if these numbers fall short, it could reinforce the perspective that Japanese authorities might have to delay any actions, subsequently exerting more downward pressure on the yen. This scenario could be exacerbated if Friday’s Consumer Price Index (CPI) figures disclose a deceleration in growth.
China/CNY: July’s Economic Data on Flashlight
Regarding China, the second-largest global economy will unveil its fixed asset investment, industrial production, and retail sales data for July on Tuesday. After the decline in exports, imports, and consumer prices, weak figures could worsen market sentiment, particularly impacting currencies of countries closely linked to China’s trade, such as the New Zealand dollar and the Australian dollar. Learn Sentiment analysis bro!
Australia/AUD: Focus on RBA Minutes and Employment Report
Aussie traders will need to process both the RBA meeting minutes scheduled for Tuesday and Australia’s employment report expected on Thursday. However, there is a high level of confidence that the RBA will maintain its inactivity during the September meeting.
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