Key Points from This Week
UK CPI Rises Faster Than Expected
UK inflation was seen rising faster than expected last month with the headline figure moving back up to 1% and core inflation moving back up to 1.8%, just below the bank’s 2% target. Both readings were well above market forecasts, prompting concerns that the inflationary environment is recovering too quickly for the current consumer environment. However, the August reading is likely to show some giveback in light of the government’s temporary VAT suspension and the Eat Out To Help Out scheme which has slashed restaurant prices this month.
OPEC Urges Continued Adherence to Cuts
Despite rumours and expectations that OPEC+ would announce the beginning of the end for its production restrictions this month, the group of OPEC and non-OPEC nations instead agreed to abide by calls to continue sticking to production cuts in the near term. The group’s de-facto leader, Saudi Arabia, has called for further cuts this month and next to help keep the market supported amidst uncertainty linked to the pandemic.
US Jobless Claims Rise Again
The US employment landscape continues to raise fears over the health of the recovery with weekly jobless claims coming in well above expectations once again. While the NFPs came in above expectations last month at 1.7 million, the reading marks a strong loss of momentum from the near 5 million reading seen in June. With more states re-entering lockdown and others postponing reopening plans, the employment outlook remains particularly challenging.
Key Events Next Week
US Durable Goods
Next week is due to be quiet in terms of data with only a few headline US prints to note. The first is durable goods on Wednesday. Traders will be looking to this number ahead of GDP to gauge the performance of the economy over the month.
US Preliminary GDP
The first look at Q2 GDP on Thursday is the key release of the week. While the reading is likely to show a vast improvement on the Q1 reading, in light of the ending of the nationwide lockdown, the reading is still expected to print in negative territory, confirming a technical recession in the US. In light of the use of local lockdowns over the quarter there are risks of the data undershooting expectations which would pull the Dollar lower.
US PCE data on Friday will also be closely watched. The measure is used by the Fed in its own inflation calculations and has the potential to create strong market volatility should we see any material surprise versus market estimates.
Keep An Eye On
Jackson Hole Symposium
The annual Jackson Hole symposium next week will see market focusing on Fed chairman Powell’s speech. The Fed chairman will deliver a review of the bank’s monetary policy framework, focusing on a new inflation strategy. Investors will be looking to learn which tools and strategy the Fed will use to target a return to its 2% inflation goal.
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