Inflation Data from UK and US Set to Rattle Markets

This week is jam-packed with fundamental data releases that will affect global markets. While Monday is relatively quiet because of Japan’s bank holiday, the rest of the week picks up pace with key data from Australia, the UK, Germany, the U.S., Japan, China, and the UK.

Key Economic Events

Monday, August 12, 2024

• Japan Bank Holiday: With Japan out for a bank holiday, market action is expected to be limited in Asia, which might translate into muted trading volumes.

Tuesday, August 13, 2024

• 02:30 AM (AU) – NAB Business Confidence (JUL): A look at Australian business sentiment.

• 07:00 AM (GB) – Unemployment Rate (JUN): Data on UK labour market—crucial for the Bank of England’s policy direction

• 10:00 AM (DE) – ZEW Economic Sentiment Index (AUG): Germany’s investor sentiment measure.

• 01:30 PM (US) – Producer Price Index PPI MoM JUL: Early indication of the US inflationary pressures.

Wednesday, August 14, 2024

• 07:00 AM GB – Inflation Rate YoY JUL: This data is going to help the markets look into UK inflation and future rate moves by the BoE.

• 01:30 PM US – Core Inflation Rate YoY JUL: Crucial data to obtain the underlying or core inflation rate in the US.

• 01:30 PM (US) – Inflation Rate YoY (JUL): A broad measure of US inflation and thus of relevance to Fed policy expectations.

Thursday, August 15, 2024

• 12:50 AM (JP) – GDP Growth Rate QoQ Prel (Q2): Japan’s economic growth data with implications for BoJ policy.

• 03:00 AM (CN) – Industrial Production YoY (JUL): Indicator of China’s manufacturing sector strength

• 03:00 AM (CN) – Retail Sales YoY (JUL): Key measure of consumer demand in China.

• 07:00 AM (GB) – GDP MoM (JUN): Monthly GDP figures assessing the performance of the UK economy.

• 01:30 PM (US) – Retail Sales MoM JUL Key (US): retail sales data for spending consumption.

Friday, August 16, 2024

• 07:00 AM GB Retail Sales MoM (JUL): The UK’s retail sales numbers are due for release and will give insight into the consumer spending behaviour and health of the economy.

• 01:30 PM (US) – Building Permits Prel (JUL): A leading indicator of future construction activity in the U.S.

• 03:00 PM (US) – Preliminary Michigan Consumer Sentiment (AUG): Showing confidence of U.S. consumers; this gauge affects the spending outlook of people and, subsequently, the economy: Check here

Market Impact

This week’s data is likely to create activity, particularly around Wednesday’s U.S. inflation data and UK GDP and inflation figures. Japanese GDP and Chinese industrial and retail data will be closely watched, providing signs about the global economy and probable central bank action.

Major Currency Pairs

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The EUR/USD remains confined to a tight range, though trading within 1.0900 support and 1.0960 resistance levels. A breakout above 1.0960 would open the way for testing the 1.1000 level in the Euro, while a drop below 1.0900 might lead to further declines towards 1.0860.

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GBP/USD: The pound seems to have taken a rest around 1.2750. If prices go above 1.2800, we may further see it at 1.2850. However, it is highly bearish in trend, so traders should know that reversals could happen any time.

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USD/JPY: also shows consolidation near the 148.00 level. A breakout could drive the pair to test the 151.00 mark, but a slip below 145.00 could make it drop further down toward the 142.00 level.

Commodities

Oil: Crude prices clawed back, with WTI futures up nearly 0.9 percent at $76.84 a barrel and Brent at $79.66, from the recent wobble amid several weeks of losses, underpinned by tightening supplies and rising tensions in the Middle East. All eyes this week will be on the OPEC report and US inventory data.

Gold: Gold is steady near $2,427 per ounce. The metal stays well underpinned by geopolitical risks and expectations of Federal Reserve rate cuts. It is now on traders’ radars how the $2,440 level will be broken out or pulled back.

Political News:

There has been much speculation with respect to the Fed’s next move in the U.S., with conflicting signals emanating from the most recent economic data. While Fed speakers provided hints of possible easing, they did it very carefully, hence keeping the market on high alert. Attention is therefore diverted to this week’s CPI data, which could give more lucid signals as to what path the Fed intends to pursue.

UK’s political stability still remains questionable, with the government under pressure over economic management in view of the sticky inflation and cost-of-living issues. The impending data relating to UK inflation will be a major determinant of the policy direction the Bank of England decides to take.