After a tumultuous week including the big Brexit battle, escalating trade wars, the NFP, and Powell´s speech, the focus shifts to the ECB and its upcoming stimulus. In addition, US inflation and retail sales stand out. Here the highlights for the next week.
- UK GDP: Monday, 8:30. The British economy contracted by 0.2% in the second quarter – in a “payback” quarter that followed stockpiling related to Brexit. The upcoming report is for July and will provide the first look into the third quarter. After stagnating in June, the economy may have squeezed in July.
- UK jobs report Tuesday, 8:30. Back in June, wage growth accelerated and hit a high of 3.7% or 3.9% excluding bonuses. The upbeat salary numbers were only partially dampened by the rise in the unemployment rate from a low level of 3.8% to 3.9%. The report for July will likely show a similar number. The Claimant Count Change, or jobless claims, will likely show another increase.
- ECB decision: Thursday, the decision at 11:45, press conference at 12:30. The European Central Bank is set to introduce a significant package of monetary stimulus. The Frankfurt-based institution has already hinted at this in its previous meeting in July. A looming German recession, slowing global demand, and subdued inflation has all pushed the bank to pre-announce a move. A rate cut of 10 basis points from the current deposit rate of -0.40% – already deep in negative territory – is a minimal step and priced in by markets. President Mario Draghi and his dovish colleagues may push for a deeper cut of 20bp or even a resumption of the bond-buying scheme (QE). However, hawks such as Bundesbank President Jens Weidmann will likely push back. The euro may rise if the ECB settles for a minor rate cut – especially if it is accompanied by a tiering system that exempts some banks from lower rates. If the bank goes for a more aggressive move, the common currency has room to fall.
- US inflation: Thursday, 12:30. One of the main reasons for the Federal Reserve’s rate cut in July was low inflation. Less than a week ahead of the next Fed decision, it will receive fresh inflation figures for August. Headline Consumer Price Index (CPI) rose by 0.3% in July and Core CPI by 0.3% on a monthly basis and 2.2% on an annual one. An acceleration may cast doubt on the Fed’s intentions to raise rates, while a fall back to 2% or lower may trigger speculation for a more dovish message.
- US retail sales: Friday, 12:30. The US consumer has been on a roll in July, with headline sales jumping by 0.7% and core sales by 1%. Consumer confidence measures for August have been mixed, indicating a weaker volume of sales in August. The data also feeds into the Fed decision in the following week.
- US Consumer Confidence: Friday, 14:00. The final version of the University of Michigan’s consumer sentiment measure for August has fallen below 90 points – the lowest since October 2016. Consumption has held the economy up in recent months, and worrying forward-looking indicators may trigger further action from the Fed. he preliminary data for September will be watched very closely.
*All times are GMT
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