The Week Ahead – US CPI Report Could Refuel Fed Rate Hike Bets

On the Macro

It’s a big week ahead on the economic calendar. While the Fed will not deliver another interest rate decision until September, the US economic calendar will influence bets on a September Fed rate hike. The US CPI Report and Producer Price Index numbers are in focus.

For the Dollar:

The US CPI Report and weekly jobless claims figures will move the dial on Thursday. While recent labor market numbers suggest a softening in labor market conditions, the US unemployment rate and wage growth remain bugbears for the Fed. A hotter-than-expected CPI Report would fuel bets on a Fed rate hike and reignite recessionary jitters.

At the end of the week, investors must also consider producer price index numbers and Michigan Consumer Sentiment figures.

Beyond the numbers, FOMC member chatter will also move the dial.

Other stats include trade data (Tue) that should have a limited impact on the dollar and market risk sentiment.

For the EUR:

It’s a quieter week for the EUR. On Monday, German industrial production numbers will draw interest. Factory orders defied gravity for a second consecutive month in June. The numbers suggest a sharp increase in production that would contrast with the latest manufacturing PMI survey-based figures.

Other stats include finalized inflation figures from Germany, France, and Spain. We expect EUR/USD sensitivity to revisions.

From the ECB, the ECB Economic Bulletin will also move the dial. Investors need clues on what’s next from the ECB.

For the Pound:

It is a busier week for the Pound. However, investors need to wait until Friday for the UK GDP Report. The second quarter GDP and manufacturing production figures will likely be focal points.

Other stats include July housing sector data and BRC Retail Sales Monitor numbers. However, barring dire figures, the stats should have a limited impact on the GBP to USD pairing.

With the economic calendar on the busy side, investors should track BoE chatter throughout the week. BoE Chief Economist Huw Pill (Mon) is on the calendar to speak. Huw Pill will hold a monetary policy report live Q&A at 1700 BST.

For the Loonie:

It is another quiet week for the Loonie. However, trade data (Tue) will influence early in the week. On Wednesday, investors will likely brush aside building permit numbers for June.

With the economic calendar on the light side, crude oil prices and market risk sentiment will provide direction.

Out of Asia

For the Aussie Dollar:

It is a quiet week ahead for the Aussie Dollar, with the July NAB Business Confidence Report (Tue) the only report to consider.

The light economic calendar will leave the Aussie dollar in the hands of stimulus news from Beijing and economic indicators from China.

For the Kiwi Dollar:

It’s a relatively quiet week for the Kiwi Dollar. Electronic card retail sales (Wed) and business PMI (Fri) numbers for July will draw interest. However, inflation expectations (Wed) will have more impact.

Numbers from China will also need consideration.

For the Japanese Yen:

It is a quiet week for the Japanese Yen. Household spending numbers for June will move the dial on Tuesday. The jury is out on whether the Japanese economy is beginning to gain momentum. Consumption remains a consideration for the BoJ.

Beyond the economic calendar, any Bank of Japan moves to tackle yields and market risk sentiment will also influence.

Out of China

It is a busy week ahead. Trade data for July will draw interest on Tuesday ahead of inflation numbers on Wednesday. Both reports will affect market risk sentiment.

However, stimulus chatter will also move the dial.