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Last week saw geopolitical tensions between the US and North Korea reach fever pitch as the leaders of both sides stepped up the war of words. However, after a weekend in which both the tweet-happy Trump and unpredictable Kim avoided further warmongering, FX traders have returned to relative calm.
As a result, eyes are likely to move away for the Korean peninsula, at least for the time being, as key elements of the UK’s Brexit negotiating strategy are set to be released. The publishing of the position papers coincides with PM Theresa May’s return to the political arena after her Summer holiday, while manoeuvring within her cabinet looks to have results in a victory for the ‘hard’ Brexit camp. Subsequently, Sterling continues to trade close to its 10-month lows of last week and may rely on drivers this week from outside of the political sphere.
The UK headlines macroeconomic proceedings this week, with key readings likely to heavily influence sentiment at the Bank of England. Despite being one of the most rollercoaster weeks in global politics since Donald Trump’s election in November, Sterling only moved by a single cent against the US dollar, its tightest weekly trading range in three years.
Starting on Tuesday, Consumer Price Inflation (9:30am) will be closely scrutinised by policymakers at Threadneedle Street. Having unexpectedly fallen in June to 2.6% from May’s 4-year high of 2.9%, markets are expecting a slight uptick in July.
Any reading above 3% would likely create significant discussion surrounding a rate hike in the not-too-distant future, especially if Wednesday’s Unemployment & Earnings figures (both 9:30am) show that the labour market is continuing to tighten yet wages remain stagnant, creating a pinch on consumers’ pockets.
Rounding off the data barrage is July’s Retail Sales figure (Thursday; 9:30am), expected to retreat from June’s 2.9% although remaining above May’s equal 2017 low reading of 0.9%
Finally, after a relatively quiet week last week for the Euro, flash German and final Eurozone GDP readings (7am Tuesday and 10am Wednesday, respectively) and the final reading of Eurozone Inflation (Thursday; 10am) provide the European Central Bank with three key data releases to consider.
The two former measures provide backward-looking insight into the effectiveness of current monetary policy, while the latter will highlight the hurdles that still need to be overcome. Strong GDP figures from the Eurozone (seen confirmed at its highest since Q1 2011) and its engine room (expected at its highest since Q1 2016) could see the Euro return to its to its two and a half year highs against the US dollar, however soft inflation data could quash the hawkish turn at the ECB.
Elsewhere, other notable macroeconomic releases this week include US Retail Sales (Tuesday; 1:30pm) NAHB Housing Index & Business Inventories (Tuesday; 3pm), US Housing Starts (Wednesday, 1:30pm), the Philadelphia Fed Index (Thursday; 1:30pm) German Producer Price Inflation (Friday; 7am) and University of Michigan Consumer Confidence (Friday; 3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
09:30 Inflation, House Prices
Intl Economic Announcements
07:00 GDP (DE)
13:30 Import/Export Inflation, Empire Manuf, Retail Sales (US)
15:00 NAHB Housing Index, Business Inventories (US)
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UK Economic Announcements
09:30 Unemployment, Earnings
Intl Economic Announcements
10:00 GDP (EZ)
13:30 Housing Starts/Permits (US)
15:30 Oil Inventories (US)
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UK Economic Announcements
09:30 Retail Sales
Intl Economic Announcements
10:00 Inflation (EZ)
13:30 Jobless Claims, Philly Fed (US)
14:15 Industrial Production (US)
Intl Economic Announcements
07:00 Producer Price Inflation (DE)
10:00 Construction Output (DE)
15:00 Uni of Michigan Consumer Confidence (US)
18:00 Baker Hughes Oil Rig Count (US)
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