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Market Insights - Unpacking UK GDP, US Inflation, and Powell Testimony

Market Insights – Unpacking UK GDP, US Inflation, and Powell Testimony

This week, we are unpacking UK GDP, US Inflation, and Powell Testimony. Last week’s fireworks weren’t just limited to Independence Day, UK’s elections and Labour Party’s victory. The S&P 500 ($SPX) hit a new all-time high, and Tesla (TSLA) zoomed above the $250 mark. While the start of this week looks calm, the latter half is packed with economic data releases, including PPI, CPI, and crucial sentiment indicators. Powell’s testimony before the Senate Banking Committee and several Fed speakers will also keep the market buzzing.

The dollar is modestly stronger as a surprise win of the left-wing alliance in the French second-round legislative elections sent European currencies lower. Safe-haven demand boosted the Japanese Yen (JPY) and Swiss franc (CHF).

What to Watch This Week

This week is a hot one for US macroeconomic data, with Thursday being the focal point due to the CPI report for June. Here’s a day-by-day breakdown.

Monday-A Quiet Prelude

No Major Activity

Monday kicks off gently with no major economic activities on the radar. Traders and investors can use this calm before the storm to strategize and prepare for a bustling rest of the week.

Tuesday-Powell Takes the Stage

Powell Takes the Stage

Fed Chair Jerome Powell’s testimony before the Senate Banking Committee at 10 am is expected to be the highlight. Given the current economic climate marked by wage stagnation and inflationary pressures, Powell’s Q&A session could stir significant market volatility, especially if discussions pivot towards interest rates and future monetary policy directions.

Don’t overlook speeches from other FOMC members sprinkled throughout the week. Although they typically don’t have a lasting impact, they can trigger short-term market movements during their delivery.

Wednesday-Midweek Mayhem

A Data-Driven Day

Wednesday is packed with pivotal economic data that could reshape market dynamics. Early in the day, New Zealand releases its Official Cash Rate, potentially affecting the NZD and related currency pairs.

Powell continues his testimony, adding another layer of potential market reactions. The auction of 10-year bonds and China’s annual inflation data could also influence trading, particularly for the AUD due to Australia’s trade relationship with China.

Later in the day, the US releases its CPI data for both month-on-month and year-on-year metrics. Also on the docket are unemployment claims and the 30-year bond auction. Britain’s monthly GDP figures will be closely watched as well, following the GBP/USD’s rally to levels not seen since mid-June. The market eagerly awaits Powell’s insights and the US inflation data, which could solidify expectations for a September rate cut.

Thursday-All Eyes on US Inflation

US Inflation Takes Center Stage

The US CPI inflation report could be the week’s game-changer. Consensus expects core CPI to hit 0.2% month-on-month (3.4% year-on-year). A higher print, particularly anything rounding to 0.4% month-on-month, could prompt traders to question the extent of anticipated rate cuts. This would likely lead to a spike in US 2-year Treasury yields and a subsequent sell-off in US equity indices.

Conversely, an inline CPI print could justify current rate expectations and propel equity markets higher. Should the CPI come in below 0.2%, market expectations for a September rate cut would likely be cemented, resulting in a weaker USD and stronger equities and gold.

Friday-Finishing Strong

PPI and Consumer Sentiment Reports

Friday wraps up the week with the US PPI monthly report and preliminary University of Michigan Consumer Sentiment Index. Both reports have the potential to sway market sentiment and impact the USD.

In the Markets Today

  • EUR/USD holds steady around 1.0850 ahead of Powell’s testimony. The pair started the week with a bearish gap due to the French election results but stabilized near 1.0850 as investors await Powell’s testimony.
  • GBP/USD climbs to multi-week highs near 1.2850. The pair advanced to its highest level since mid-June above 1.2800, benefiting from a weakened USD as market focus shifts to Powell’s testimony.
  • Gold declines toward $2,370 despite USD weakness. After impressive gains on Friday, gold faces bearish pressure due to reports that China’s Central Bank paused gold purchases for the second consecutive month in June.
  • Bitcoin trades above $57,000 even as investors remain cautious amid concerns over German BTC transfers.

Expected Earnings Releases from Major Banks

Look out for earnings reports from J.P. Morgan Chase & Co, Wells Fargo & Company, Citigroup Inc., and The Bank Of New York Mellon Corporation.

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.

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