FX WEEK AHEAD OVERVIEW:
- The economic calendar is littered with significant event risk over the coming week, including the July US and UK inflation reports as well as the July Australia jobs report.
- But there may not be anything more important than the day-to-day progress (or lack thereof) in the US-China trade war.
- Retail trader positioning suggests that the commodity currencies will continue to face pressure in the days ahead.
08/13 TUESDAY | 12:30 GMT | USD CONSUMER PRICE INDEX (JUL)
The July US inflation report (consumer price index) due on Tuesday is due to show another small rebound in price pressures, but nothing that should motivate the Federal Reserve to alter its current aggressively dovish policy path in any significant manner.
According to Bloomberg News, headline CPI is expected in at 1.7% from 1.6%, and core CPI is due in at 2.1% unchanged (y/y). As global growth concerns have picked up in recent months, price pressures have dropped thanks in part to a downswing in crude oil prices. However, stability in July may be catering to relatively stable inflation as well (though this should change come the August report).
08/14 WEDNESDAY | 08:30 GMT | GBP CONSUMER PRICE INDEX (JUL)
For any other currency, a data release with a ‘high’ rating would likely stir meaningful volatility. But for the British Pound haunted by the prospect of a no deal, “hard Brexit,”economic data releases have been neutered.It remains the case that if the Brexit negotiations are in the works, the Bank of England won’t act on interest rates, and therefore data related to policy decisions have been downgraded in terms of expected impact on markets. Considering this reality, any Brexit-related developments, especially now that rumors of a snap general election are afoot, would quickly supersede any reaction to the July UK inflation report.
08/14 WEDNESDAY | 09:00 GMT | EUR EUROZONE GDP (2Q P)
According to a Bloomberg News survey, the first revision to the Q2’19 Eurozone GDP report is due but no change is expected. The quarterly rate is due in on hold at 0.2% while the yearly rate is set to hold at 1.1%. Consistently weak growth figures should serve to reinforce the European Central Bank’s Governing Council’s view that risks have moved “to the downside,” and to this end, that more easing will arrive in September when the ECB releases the next iteration of its Staff Economic Projections.
08/15 THURSDAY | 01:30 GMT | AUD EMPLOYMENT CHANGE & UNEMPLOYMENT RATE (JUL)
Even as the US-China trade war rages on, the Australian economy continues to weather the storm between its two largest trading partners. The Australian economy has added jobs for 11 consecutive months, even though last month’s report was rather disappointing a net 471 jobs. Meanwhile, the unemployment rate has been on hold at 5.2% for three consecutive months.
According to a Bloomberg News survey, July will make it 1 months in a row with positive jobs growth. Australian employment is due to have increased by 14K last month, and for the fourth consecutive month, the unemployment rate is set to hold at 5.2%. Despite a dramatic 50-bps by its southern neighbor in the Reserve Bank of New Zealand in August, rates markets still don’t see the Reserve Bank of Australia cutting rates until October 2019.
08/15 THURSDAY | 12:30 GMT | USD RETAIL SALES ADVANCE (JUL)
Consumption is the most important part of the US economy, generating around 70% of the headline GDP figure. The best monthly insight we have into consumption trends in the US might arguably be the Advance Retail Sales report. In July, according to a Bloomberg News survey, consumption slumped with the headline Advance Retail Sales due in at 0.3% from 0.4% (m/m). Similarly, the Retail Sales Control Group, the input used to calculate GDP, is due in at 0.4% from 0.7% (m/m). Growth expectations may only be mildly supported coming out of the data, and the Atlanta Fed GDPNow Q3’19 growth estimate should remain below 2%.