Jackson Hole Meeting and Powell’s speech will be the most important event of the week ahead of us. We will also have RBNZ meeting, inflation data from the UK and Canada as well as preliminary PMI data from the Eurozone and the UK.
USD
July inflation report saw headline number stay at 2.7% y/y while markets were expecting a 2.8% y/y print. Monthly figure came in at 0.2% as expected (0.197% unrounded). Core CPI rose to 3.1% y/y vs 3% y/y as expected and up from 2.9% y/y in June. Monthly print was 0.3% as expected (0.322% unrounded). When looking at the composition we see that goods inflation was 0.2% m/m while services rose 0.4% m/m indicating that companies are absorbing majority of tariff costs. Medical and transportation services both increased by 0.8% m/m while airline fares surged by 4% m/m. Shelter, the biggest component of CPI, rose by benign 0.2% m/m and 3.7% y/y. Biggest increase in prices were seen in tools, hardware and other equipment category with 1.6% m/m followed by motor vehicles and furniture categories, both printing 0.9% m/m. Biggest drops were seen in motor fuel -2% m/m followed by information technology commodities -1.4% m/m.
PPI report for the month of July caught markets by surprise. Headline number came in at 3.3% y/y vs 2.5% y/y as expected and up from 2.4% y/y in June. Core PPI rose 3.7% y/y vs 2.9% y/y as expected and up from 2.6% y/y the previous month. Monthly number saw both readings increase by 0.9%! Tariff effects were not seen in CPI but are clearly seen in PPI and in import prices rising 0.4% m/m showing that companies are bearing increased costs. This will in turn reflect on their profit margins and earnings, since companies will not allow that they will be looking to pass these increased costs onto consumers which will lead to higher inflation.
US and China have agreed on another 90-day extension to the tariff truce. After CPI report was published president Trump released a new slew of insults to Fed Chair Powell on the social network calling him “loser” among other things and screamed for rate cuts. US fiscal deficit for the month of July came in at $291bn. Chair of the Kansas City Fed Schmid stated that it is not yet time for rate cuts and that he will dissent if the committee opts for that path thus showing deeper divide within the Fed. US Treasury Secretary Bessent stated that Fed rate should be 150-175bps lower and that there is a good chance of a 50bp rate cut at the next meeting.
Retail sales report for the month of July saw numbers come in line with expectations. Headline number printed growth of 0.5% m/m while ex autos category grew by 0.3% m/m. Prior month’s readings were revise up thus giving the report even shiner glow. Control group reported a growth of 0.5% m/m vs 0.4% m/m while June reading was revised up to show a growth of 0.8% m/m. Motor vehicles and parts dealers showed biggest increase rising 1.6% m/m followed by furniture stores with 1.4% m/m growth while miscellaneous store retailers showed biggest drop (-1.7% m/m). Food servicing and drinking places, a good proxy for the disposable income, declined by 0.4% m/m casting a shade to otherwise strong report.
The yield on a 10y Treasury started the week at 4.29%, rose to 4.34% and finished the week at around 4.33%. The yield on 2y Treasury started the week at 3.77%, rose to 3.78% and finished the week at around 3.75%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 58bp as curve continues to meander between steepening and flattening. After the CPI report FedWatchTool sees the probability of a 25bp rate cut at September meeting around 94%, while probability of a no cut is around 6%.
This week we will have Jackson Hole Meeting. Powell’s speech at the meeting will be crucial as markets will be waiting for Chairman to acknowledge weakness in the labour market and give a nod to the September cut.
Important news for USD:
Friday:
Powell Speech at Jackson Hole Meeting
EUR
Final July CPI saw no changes to German, French and Spanish readings (2% y/y, 1% y/y and 2.7% y/y respectively). Second estimate of Q2 GDP was unchanged at 0.1% q/q and 1.4% y/y.
This week we will have preliminary August PMI data expected to show further improvements.
Important news for EUR:
Thursday:
Manufacturing PMI (Eurozone, Germany, France)
Services PMI (Eurozone, Germany, France)
Composite PMI (Eurozone, Germany, France)
GBP
July payrolls change saw economy lose another 8k jobs after shedding 26k jobs the previous month as the combination of National Insurance, which is a payroll tax, hikes and a sizeable increase in the National Living Wage in April continue to take their toll on the labor market. ILO June unemployment rate stayed at 4.7% while average weekly earnings showed 4.6% 3m/y rise after a 5% 3m/y increase in May. Ex bonus category again showed 5% 3m/y increase. BoE will most likely pause in September, according to their one-cut-per-quarter pace, but if labor market shows further signs of weakness it would further increase chances of a November cut.
Q2 GDP came in at 0.3% q/q vs 0.1% q/q as expected on the back of a big beat in June reading (0.4% m/m vs 0.1% m/m as expected) as all sectors, services, production and construction, contributed positively. Details of second quarter GDP reveal some weaknesses as household consumption rose by 0.1% while government consumption rose by 1.2%, always concerning when government is the leading cause of growth. Business investment plunged 4%, a worrying sign. Exports rose 1.6% while imports rose by a smaller 1.4%. Expectations are for GDP to decline in the second part of the year.
This week we will have July inflation data, expected to come around 4%, as well as preliminary August PMI data.
Important news for GBP:
Wednesday:
CPI
Thursday:
Manufacturing PMI
Services PMI
Composite PMI
AUD
RBA has delivered a 25bp rate cut as was widely expected by the markets dropping the cash rate to 3.60%. The statement shows that inflation continued to moderate and domestic demand continues to recover. There was further easing in the labour market, but labor market remains a little tight. The bank will continue to be data-dependent when making future decisions on monetary policy.
RBA Governor Bullock clarified at the press conference that there was no discussion about larger rate cut. She reiterated bank’s data-dependent and meeting-by-meeting approach. She added that all projections are based on further rate cuts and would not rule out back-to-back cuts. Given their comments on the easing in labour market we can see employment data gaining more importance.
July provided stellar employment report. Economy has added 24.5k jobs after adding 2k jobs in June. The unemployment rate ticked down to 4.2% with participation rate also ticking down to 67%, both as expected. Composition of jobs was what gave this report such a shine as full-time employment rose by 60.5k, the largest increase in seventeen months. Part-time employment declined by 36k. Given the fact that RBA signaled importance of labor market this report lowers chances of new cuts which in turn led to AUD strength.
Inflation data from China for the month of July saw CPI come in flat vs -0.1% y/y as expected. Food prices declined 1.6% y/y and kept inflation flat while core CPI rose 0.8% y/y making it the highest reading in seventeen months. PPI printed -3.6% y/y, same as in June, while markets were expecting a -3.3% y/y print. The print is in negative territory since late 2022.
July economic data from China were not encouraging as they missed expectations across the categories. Industrial production showed growth of 5.7% y/y vs 5.9% y/y as expected and down from 6.8% y/y in June. Retail sales grew by 3.7% y/y, the lowest increase for the year, while markets were expecting a 4.6% y/y growth, and lower than 4.8% y/y growth seen the previous month. NBS mentioned sever weather conditions as one of the reasons for misses. The official unemployment rate has risen to 5.2% from 5% in June.
NZD
Electronic card retail sales, they cover almost 70% of total retail sales, for the month of July rose 0.2% m/m and 1.7% y/y.
This week we will have RBNZ meeting. With inflation coming down into 1-3% targeted range and unemployment rate climbing 25bp rate cut is expected.
Important news for NZD:
Wednesday:
RBNZ Interest Rate Decision
CAD
BoC meeting minutes showed that members are waiting for more data to bring more clarity before proceeding further. There was a debate within the Governing Council with some members thinking that BoC has provided enough support for the economy while others claimed that additional support for the economy would likely be needed. Members agreed that there are no signs showing that inflation expectations became de-anchored.
This week we will have inflation data expected to raise to the 2% target.
Important news for CAD:
Tuesday:
CPI
JPY
July PPI data, showed prices increase by 0.2% m/m as expected and 2.6% y/y vs 2.5% y/y as expected but down from 2.9% y/y in June. Smaller than expected decline, but still a decline, makes it a fourth consecutive month of easing corporate goods inflation. This data feeds into CPI and with it slowly returning back to 2% target we could see BoJ deciding that underlying inflation keeps staying below the 2% target, therefore they will be in no hurry to raise rates.
Reuters survey showed that almost three-quarters of companies have favorable outlook on the US – Japan trade deal. Additionally, almost half of those companies see room for more prices hikes. Whether they are content with tariffs or just with a fact that uncertainty is gone is not clear but JPY strengthened on the news. US Treasury Secretary Bessent criticized BoJ stating that they are “behind the curve” and that they need to raise rates in order to control mounting price pressures. Public comments on another country’s monetary policy are usually avoided so this came as a big surprise and added more to the JPY strengthening post Reuters report.
Preliminary Q2 GDP reading showed economy grow by 0.3% q/q vs 0.1% q/q as expected and up from being flat in the first quarter as well as 1% annualized after felling 0.2% in Q1. Growth was led by private consumption which rose 0.2% vs 0.1% as expected and business spending which came in at 1.3% vs 0.7% as expected. Net exports added 0.3pp to the reading while inventories deducted from GDP by the same amount.
CHF
SNB total sight deposits for the week ending August 8 came in at CHF465.9bn vs CHF468.5bn the previous week. Fourth consecutive move down as deposits moderate from highest levels of 2025. Preliminary Q2 GDP reading showed a growth of 0.1% q/q vs upwardly revised 0.8% q/q growth in the first quarter.
