Week Ahead: Markets to Focus on US Retail Sales and Canada, UK CPI

　　

What happened in the market last week?

• Economy-wide price pressures in the United States are gradually easing.
• Both headline and core CPI increased by 0.2% in June, the lowest monthly advance since early 2021.
• Core producer prices also saw their softest annual increase since February 2021.
• Indicators suggest that employers in the US may be pulling back on hiring despite healthy labour demand.
• The Bank of Canada raised policy rates but remains open to additional rate hikes due to persistent inflation.
• The Bank of Canada may have achieved its peak policy rate, but there is a possibility of at least one more 25 bps hike.
• Central banks across regions have room to cut interest rates before the end of the year.
• Cooling inflation data in the US led to falling Treasury yields.
• Investors expect the FOMC to hike the Fed funds rate again in July but start cutting rates in 2024.
• The 10-year Treasury yield is currently at 3.82%, down 24 bps from one week ago.
• The two-year Treasury yield, more sensitive to near-term moves in the federal funds rate, is down 20 bps.

Source: VT Markets MT4

Last Week Market Pair Changes (All data is taken from the MT4 VT Markets)

Last week, the US dollar took a hit as confidence surged in other markets, triggered by interest rate hikes from various central banks. Additionally, the emergence of lower-than-anticipated inflation rates stirred up some unfavourable sentiment towards the US dollar. As a result, the market is currently exhibiting a risk-on stance.

• USDJPY experienced a decrease of 2.32%.
• USDX saw a decline of 2.26%.
• XAUUSD recorded an increase of 1.60%.
• GBPUSD showed a rise of 2.05%.
• DJ30 witnessed a growth of 2.10%.
• USOUSD demonstrated an increase of 2.15%.
• EURUSD experienced a significant increase of 2.50%.
• NAS100 showed the highest growth rate with an increase of 3.3%2.

Source: VT Markets Economic Calendar

What to focus on this week?

This week’s economic calendar features US Retail Sales figures, as well as inflation data from both the UK and Canada — all of which have the capacity to move markets significantly. Therefore, it is crucial for traders to be prepared for any volatility that may arise from these key announcements and adjust their approaches as needed.

Keep an eye on the following economic releases:

Canada Consumer Price Index (18 July 2023)

Consumer prices in Canada rose by 0.4% in May 2023, slowing from the 0.7% increase in the previous month. 

Analysts anticipate a 0.4% increase for June data, set to be released on 18 July.

Takeaway: The forthcoming Canada CPI will provide insights into the state of inflation in Canada and is set to be a significant factor influencing the Canadian Dollar. Given the projected figures, it’s possible we might see a strengthening of the Canadian Dollar.

US Retail Sales (18 July 2023) 

US Retail Sales unexpectedly rose 0.3% month-over-month in May 2023, following a 0.4% increase in April. 

Analysts expect a similar 0.3% growth for the June data, which is scheduled for release on 18 July.

Takeaway: The upcoming US retail sales report, a key determinant for the US Dollar’s performance, will shed light on the state of consumer spending in the US. If the projected figures hold true, there’s a chance we might observe a bolstering of the US Dollar.

New Zealand Consumer Price Index (19 July 2023) 

Consumer Price Index in New Zealand rose by 1.20% in March 2023, making it the smallest price increase since Q1 2021. 

Analysts predict a 1.1% uptick for the upcoming second quarter, set to be released on 19 July.

Takeaway: The release of New Zealand CPI will be the market mover for the New Zealand Dollar. Based on the forecasted numbers, the New Zealand Dollar might strengthen.

UK Consumer Price Index (19 July 2023) 

The UK’s consumer price inflation remained stable at 8.7% in May 2023, maintaining the 13-month low recorded in the previous month. 

Anticipated for release on July 19, the upcoming CPI data is predicted by analysts to decline even further to 8.3%.

Takeaway: The UK CPI data will be the market mover for the Pound sterling this week. Based on the forecasted numbers, there is a possibility that the Pound sterling might weaken. 

Australia Employment Change (20 July 2023) 

Employment in Australia surged by 75.9 thousand to 14.10 million in May 2023. This followed a revised drop of 4.0 thousand in the previous month. Meanwhile, the unemployment rate decreased to 3.6%, down from April’s figure of 3.7%. 

Data for June 2023 is set to be released on 20 July. Analysts predict a further rise in employment, estimating an increase of 25,100. They expect the unemployment rate to remain steady at 3.6%.

Takeaway: Based on the forecasted numbers, the Australian Dollar might strengthen.