Forex Weekly Outlook Aug. 6-10 – US inflation, UK GDP, and trade as always

The US Dollar had a generally positive week amid top-tier events. What’s next? US inflation data,  UK GDP, and a mix of events from other places stand out in the first full week of August. The   Here are the highlights for the next week.

The Fed left rates unchanged as expected and made only minor tweaks to the statement, not rocking the boat. However, there were some developments on global trade that shook markets: after the US and China were reportedly seeking a restart to talks, the US announced it was interested in slapping a higher tariff of 25% on $200 billion worth of Chinese goods. Tension mounts towards the planned imposition of these duties towards the end of the month. China is already preparing retaliatory tariffs. The US Non-Farm Payrolls came out exactly as expected on wages but missed on job growth with only 157K in July. However, upwards revisions and other data countered the miss.

1. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia last changed the interest rate in August 2016, two years ago. No change is likely in this decision, in August 2018. The economy is doing OK and inflation stable. The team led by RBA Governor Phillip Lowe will likely maintain the neutral bias. Any comments about trade will be of interest to markets.
2. US JOLTS Job Openings: Tuesday, 14:00. The  Job Openings and Labor Turnover publication lags the Non-Farm Payrolls but provides the Fed with broader labor market information that it is interested in. Job openings dropped to 6.64 million annualized in May. We will now get the data for June. A level of 6.74 million is expected in June.
3. New Zealand rate decision: Wednesday, 21:00. Similar to their Australian counterparts, the Reserve Bank of New Zealand has not altered interest rates since 2016 and no change to the 1.75% Cash Rate is likely now. The recent jobs report showed a healthy growth in employment, a new mandate for the RBNZ, but a disappointing increase in wages. A slow pace of pay rises implies a slow pace of rising inflation. It will be interesting to hear if the central bank discusses trade concerns and also its new mandate.
4. US PPI: Thursday, 12:30. The Producer Price Index surprised to the upside in most months this year. Higher factory gate inflation eventually translates into consumer inflation. Both headline and core PPI rose by 0.3% in June. The publication serves as a warm up to the CPI publication on the following day. PPI is expected to rise by 0.2% m/m and core PPI by 0.3%.
5. UK GDP: Friday, 8:30. After the UK published monthly GDP growth figures for the first time last month, we will now get the quarterly GDP data for the entirety of Q2 alongside the monthly number for June. The quarterly figure will likely have a greater impact. The economy significantly slowed down in Q1, growing by only 0.2% according to the final figure. A quicker expansion is on the cards for Q2. It is important to note that the first publication of both monthly and quarterly data may trigger unexpected movements from markets. In addition, Britain also releases the manufacturing production and trade balance numbers at the same time. Quarterly GDP is forecast to rise by 0.4% and the monthly GDP for June by 0.2%. The manufacturing production carries expectations for an increase of 0.3%.
6. US CPI: Friday, 12:30. Inflation has been on the rise in the US, led by energy prices, but also Core prices have gone up, reaching an annual level of 2.3% in June. No new breakthroughs in core inflation are likely now. On a monthly level, headline CPI increased by 0.1% in June while core CPI advanced by 0.2%. The data for July will feed into the Fed’s calculations for a September hike. Both headline and core CPI figures are projected to rise by 0.2% m/m.
7. Canadian jobs report Friday, 12:30. Canada enjoyed a bounce back in job growth after two months of declines. The economy gained 31.8K positions in June. The figure for July may be more moderate. The unemployment rate reached 6%. Wages tend to move markets in addition to the employment data. After they jumped by 3.9% in May and supported the C$, a slower pace of 3.5% in June weighed on the currency.

*All times are GMT

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Further reading:

• EUR/USD forecast – for everything related to the euro.
• GBP/USD forecast – Pound/dollar analysis
• USD/JPY forecast – the outlook for dollar/yen
• AUD/USD forecast – projections for the Aussie dollar.
• USD/CADc forecast – Canadian dollar predictions

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