Traders continue to watch the Federal Reserve’s indications regarding potential rate cuts. Despite new forecasts for monetary policy that include an interest rate reduction in 2024, market expectations remain firm for the first cut in September, followed by another in November.
The upcoming Fed meeting at the end of the month, along with Chairman Jerome Powell’s recently added emphasis on data dependency, is the main reason why this week’s economic releases are important.
Monday, July 8, and Tuesday, July 9, are relatively quiet with no significant macroeconomic statistics scheduled. However, the pace picks up on Wednesday, July 10, starting with China’s Consumer Price Index (CPI) at 01:30 GMT.
The forecast has indicated a decline to 0.2% year-over-year, reflecting consumer price dynamics in China. If the CPI exceeds expectations, it could prompt the People’s Bank of China to implement fiscal tightening measures, potentially strengthening the yuan and bolstering commodity-linked currencies like the Australian dollar.
Shortly after, at 02:00 GMT, the Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision. The RBNZ is expected to maintain the rate at 5.5%. However, any deviation from this expectation or any forward guidance could impact the NZD, leading to increased market volatility.
Thursday, July 11, brings two important data points. At 06:00 GMT, Germany’s Harmonized Index of Consumer Prices (HICP) is expected to be released, with a forecast of 6.4% year-over-year. This figure is crucial for European Central Bank (ECB) policy decisions. A higher-than-expected HICP could strengthen the euro, while a lower reading might weaken it.
Later, at 12:30 GMT, all eyes will be on the US Consumer Price Index (CPI), forecasted at 3.1% year-over-year. This data point is the week’s central event, as it will likely influence the Fed’s rate decisions. A lower-than-expected CPI could lead to dollar weakness, while a higher figure might strengthen the USD.
On Friday, July 12, Germany will release its retail sales data at 06:00 GMT. This data will indicate consumer spending trends in Europe’s largest economy. Strong figures could buoy the euro, whereas weak numbers might depress it. At 12:30 GMT, the US Producer Price Index (PPI) will be announced. The PPI measures changes in wholesale prices, with higher readings suggesting increased consumer inflation, potentially strengthening the USD.
Finally, at 14:00 GMT, the University of Michigan Consumer Confidence Index’s preliminary release will reflect consumer sentiment. An increase in confidence will support the USD, while a decline could weaken it.
China’s CPI and the RBNZ interest rate decision on Wednesday will be pivotal for the yuan, NZD, and commodity currencies. Germany’s HICP and the US CPI on Thursday are also critical data points, with the US CPI likely dominating market sentiment and impacting Fed rate expectations.
Friday’s German retail sales, US PPI, and consumer confidence data will provide further clarity on economic conditions and potential central bank actions.
Traders should prepare for heightened volatility, particularly around key data points like the US CPI, which will be instrumental in guiding the Fed’s next moves.
