Tuesday’s key events include several important economic indicators from Australia, such as the Westpac consumer sentiment report, the wage price index q/q, and the NAB business confidence. In the U.K., we’ll see the release of the claimant count change, the average earnings index 3m/y and the unemployment rate. Meanwhile, in the U.S., the market will focus on the PPI m/m.
Wednesday will bring the RBNZ’s monetary policy announcement, the U.K. CPI and the U.S. inflation data.
On Thursday, Australia will release its employment change data and the unemployment rate. The U.K. will publish its monthly GDP report and preliminary GDP q/q and the U.S. will announce the retail sales m/m and the unemployment claims.
Finally, Friday will feature retail sales data from the U.K., along with several key economic indicators from the U.S., including building permits, housing starts, the preliminary UoM consumer sentiment and the preliminary UoM inflation expectations.
The Westpac consumer sentiment in Australia dipped by 1.1% in July, remaining in the pessimistic range where it has been for the past two years. This persistent pessimism is largely driven by concerns over inflation and potential rate hikes. For this month’s print, no improvement is expected. It’s worth noting that the Reserve Bank of Australia (RBA) recently left rates unchanged but struck a more hawkish tone than anticipated, despite the June quarter inflation data not being as high as feared.
In the U.K., the consensus for the claimant count change is 14.5K, compared to the prior 32.3K. The average earnings index 3m/y is expected to be 4.6% versus the previous 5.7%, and the unemployment rate is anticipated to rise from 4.4% to 4.5%.
While the job market in the U.K. is showing signs of cooling, there isn’t yet enough data to determine whether this is a temporary trend or indicative of a more significant deterioration.
At this week’s meeting, the RBNZ is expected to keep its monetary policy unchanged, maintaining the OCR at 5.5%. Traders will be watching closely for any hints of a potential rate cut in October or November, as well as any downward revisions to the official cash rate projections for 2025 and 2026.
While the RBNZ remains concerned about elevated inflation, there are indications that it is gradually returning to the desired target. However, the recent cooling was registered for tradable goods while services inflation is proving more persistent. Nevertheless, there are also signs that the economy contracted in Q2 and the labor market softened with a rise in unemployment rate.
This week’s inflation data for the U.K. will determine the BoE’s next move. At the last meeting, the Bank delivered its first rate cut and signaled a cautious approach to further cuts due to ongoing concerns, particularly regarding services inflation. Policymakers forecast that headline inflation will rise back to 2.8% during the second half of this year before cooling back down towards the target.
For this week’s data, the consensus for headline inflation is 2.3%, with the core CPI expected at 3.4%, and services inflation likely to print at 5.5%. In terms of monetary policy, the market anticipates another 25 bps rate cut in November. However, some analysts suggest that if this week’s inflation and jobs data come in below expectations, the BoE might opt for another cut in September.
The U.S. CPI data will be the highlight of the week, as everyone is eager to see if inflation will continue to decline.
Recently, U.S. inflation has shown improvement and is moving toward the desired target, although it hasn’t decreased as quickly as expected. The consensus for the headline CPI in July is a rise by 0.2%, with the core CPI also expected to increase by 0.2%. However, inflation is anticipated to decrease in the near future.
The consensus for employment change in Australia is 20.4K, compared to the previous 50.2K, with the unemployment rate expected to remain unchanged at 4.1%.
Last month’s employment figures surprised to the upside with an increase of 50.2K, but this was largely due to population growth, as the overall labor market in Australia has begun to cool down.
The participation rate climbed to 66.9% in June, just below a 114-year high, which pushed the unemployment rate to 4.1% as the labor force outpaced employment growth. For July, the participation rate is expected to remain steady at 66.9%, with unemployment holding at 4.1%. Key indicators such as underemployment, average hours worked, and youth unemployment will be closely watched for signs of increasing slack in the labor market, Westpac analysts noted.
The consensus for U.S. retail sales m/m is a rise of 0.4% vs 0.0% prior. For core retail sales m/m, the consensus is +0.1%, also up from the previous 0.0%.
June’s retail sales data showed unexpected strength despite a flat headline number. Core spending remained steady, and control group sales increased by 0.9%, driven by a 1.9% rise in non-store sales. Additionally, sales of building materials rose, offsetting the trend of weak home sales. The overall weakness was primarily attributed to declines in auto and gasoline sales.
While consumer resilience was evident, retail growth is slowing from its rapid post-pandemic pace. Looking ahead, analysts from Wells Fargo anticipate July’s retail sales to increase by 0.3%, bolstered by a rebound in auto sales, while ex-auto sales are expected to rise modestly by 0.1%. However, the outlook is tempered by a cooling labor market and slower growth in real income.
This article was written by Gina Constantin at www.forexlive.com.
