Week Ahead: All Eyes on US Consumer Price Index and Producer Price Index

　　

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

What happened in the market last week?

• US data showed strong growth and easing inflation.
• Initial indicators for July suggested continued firm activity.
• Gradual cooling of the US labour market observed.
• Multiple central banks convened to assess monetary policy.
• G10 and emerging market policymakers discussed economic conditions and interest rates.
• Some tightened policy, others-maintained settings, and some implemented rate cuts.
• Fitch Ratings downgraded the US credit rating from “AAA” to “AA+.”
• Concerns arose about increased borrowing costs for the federal government.

Source: VT Markets MT4

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

The US dollar weakened after the release of the July non-farm payrolls report, which showed that the US economy added 187,000 jobs, below market expectations of 200,000. This was the second consecutive month of job growth below 200,000 and raised concerns about the strength of the US labour market. The weaker-than-expected jobs report also weighed on risk appetite, which led to a sell-off in US equities and a decline in the US dollar.

• NAS100 took dip of 3%.
• DJ30 saw a slight drop of 1.23%.
• XAUUSD lost some ground, down 0.83%.
• GBPUSD took a small hit, down 0.69%.
• EURUSD slipped by 0.09%
• USDX managed a gain of 0.41%
• USDJPY picked up momentum, rising by 0.59%.
• USOUSD made a significant jump of 2.52%.

Source: VT Markets Economic Calendar

What to focus on this week?

Several key market events are expected to influence the financial markets this week. Specifically, the highly awaited US Consumer Price Index and Producer Price Index will be released. In light of these crucial announcements, we advise traders to approach their trading preparations with caution, considering the potential for heightened market volatility. 

Here are some key economic highlights to keep an eye on during the week:

New Zealand Inflation Expectations (9 August 2023)

Inflation expectations in New Zealand declined to 2.79% in Q2 2023 from 3.3% in Q1 2023.

The figures for Q3 2023 will be released on 9 August, with analysts expecting another decrease to 2.5%. 

Takeaway: The projected inflation slowdown in Q3 might have a positive effect on the New Zealand Dollar.

US Consumer Price Index (10 August 2023)

Consumer prices in the US rose 0.2% month-over-month in June 2023 after a 0.1% increase in the previous month.

Analysts anticipate a 0.2% rise in the figures for July, scheduled for release on 10 August. 

Takeaway: The slight rise indicates a deceleration in inflationary pressures. This slowdown could be attributed to various factors, such as stabilising commodity prices or reduced demand for certain goods and services. However, the projected increase for July suggests a potential rebound in inflationary trends. This might have a positive effect on the US Dollar.

UK Gross Domestic Product (11 August 2023)

The British economy shrank by 0.1% month-over-month in May 2023, following a 0.2% growth rate in April.

The figures for June are set to be released on 11 August, with analysts expecting the country’s GDP to grow by 0.1%. 

Takeaway: The expected rise in GDP for June suggests a potential stabilisation or plateauing of growth momentum. This might have a positive effect on the British Pound. 

US Producer Price Index (11 August 2023) 

Producer prices for final demand in the US edged up 0.1% month-over-month in June 2023, following a 0.4% fall seen in May.

The data for July 2023 will be released on 11 August, with analysts expecting a 0.2% increase.

Takeaway: The expected increase in July indicates a possible rebound in producer prices, indicating a renewed upward trajectory. It’s essential to monitor these trends as changes in PPI can have implications for consumer prices and overall inflation levels. This might have a slight negative effect on the US Dollar.

University of Michigan Consumer Sentiment Index (11 August 2023)

The University of Michigan consumer sentiment for the US was revised lower to 71.6 in July 2023 from a preliminary reading of 72.6. It was the highest reading since October 2021 due to the continued slowdown in inflation along with the stabilisation of labour markets.

Analysts expect a reading of 70.9 in the upcoming set of data, due for release on 11 August.

Takeaway: The rise in consumer sentiment indicates growing optimism among consumers about the economy. This positive outlook can lead to increased consumer spending and overall economic growth. The anticipated increase in July suggests a continued positive trend. This might have a positive effect on the US Dollar.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.