China’s devaluation of the yuan has escalated trade wars and additional central banks eased policies, resulting in a mixed week for the dollar. Where next? Trade remains central but the greenback’s next moves also depend heavily on consumer data. Here the highlights for the next week.
China hit back at the US – not by tariffs – but by allowing the yuan to fall. The escalation of the trade war into an outright currency war has weighed on global markets, sending money into the safety of bonds – which has raised speculation of a Fed rate cut. This has weighed on the greenback against the safe-haven yen and the euro but not against commodity currencies. The RBNZ slashed rates by 50bp, hitting the kiwi and falling oil prices hurt the loonie. The pound has only temporarily recovered.
- UK jobs report: Tuesday, 8:30. The UK labor market is bustling despite Brexit uncertainty. Wages remain center-stage as the Bank of England is focused on inflation – including price rises stemming from higher salaries. Average Hourly Earnings are expected to rise by 3.7% on an annual basis in June, an acceleration from 3.4% in May. The unemployment rate is expected to stay put at 3.8% – a historic low. The jobless rate remains low despite an increase in the Claimant Count Change, which carries expectations for another rise of 42K this time.
- US inflation: Tuesday, 12:30. The Federal Reserve cut rates due to two main reasons – trade tensions and subdued inflation. The latter reason will come to a fresh test now. The Consumer Price Index is expected to rise by 0.3% and Core CPI by 0.2% MoM and remain at 2.1% YoY. Any 0.1% deviation may have a significant impact on all markets.
- German GDP: Wednesday, 6:00. Wednesday, 6:00. The euro zone’s largest economy has been suffering from a manufacturing slump. Has it turned into an outright contraction? Expectations stand at a squeeze of 0.1% in the second quarter after growing by 0.4% in the first quarter of the year. The GErman number feeds into the updated all-European one which stood at 0.2% in the initial read.
- UK inflation: Wednesday, 8:30. The headline CPI has been at exactly the Bank of England’s 2% target back in June and may have slipped to 1.9% in July – raising the chances that the BOE cuts interest rates either in its upcoming meeting in September or in early November – right after Brexit. Core CPI is projected to remain unchanged at 1.9%.
- Australian jobs report: Thursday, 1:30. The Australian labor market has hardly gained jobs in June – only 500 people have been added to the workforce. A more significant increase of 14.2K is projected for the report for July while the unemployment rate is expected to remain unchanged at 5.2%.
- US retail sales: Thursday, 12:30. The US economy is centered around consumption – and this has been a substantial source of growth of late. Headline sales are expected to moderate in the report for July – 0.3% against 0.4% in June. Core sales are expected to rise by 0.4% once again while the control group – which has jumped by 0.7% in June – is expected to have advanced at a modest pace.
- US consumer sentiment: Friday, 14:00. Consumer sentiment is considered a gauge of future consumption – and the correlation has been high of late. After scoring 98.4 points in the final release for July, the University of Michigan’s preliminary read for August is expected to stand at 97.2 points.
*All times are GMT
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