On Wednesday, July 12, The BLS reported that inflation in the USA fell from 4% in May to an annualized 3% in June, as measured by the change in the CPI index. The core CPI, which strips out volatile energy and food prices, fell to 4.8% from 5.3%. Also, the total and net monthly CPI index increased by 0.2%, which was lower than the forecasts. The dollar came under intense downward pressure as investors began reassessing the Fed's interest rate outlook. As a result, the dollar's value weakened against other currency pairs. Also, gold and stocks had a good rise due to the decline in the dollar's value.
On Thursday, July 13, the BLS announced that the annual US producer price index fell from 0.9% in May to 0.1% in June.
After the weak release of the CPI and PPI indicators, according to the CME Group FedWatch Tool report, the Federal Reserve interest rate is likely to increase by 0.25% in December, in addition to a 0.25% increase in July. Note that the members of the Fed have entered a period of silence before the July 26 meeting.
Before the end of the week, the University of Michigan reported that its consumer confidence index improved to 72.6 from 64.4 in early July. The release was better than market expectations for 65.5 and prevented the dollar from weakening further.
The economic calendar is not busy this week, and market participants are focusing on the countries' consumer price index.
On Tuesday, the US economic calendar will release June retail sales index, which is expected to rise 0.5% after May's 0.3% gain, and the core retail sales index, which was 0.1% the previous month, is expected to rise 0.3%. Although the data is unlikely to change the pricing of the Fed's interest rate outlook, a strong release could help the dollar boost demand with an immediate reaction and strengthen in the initial moments of the news release.
On Wednesday, July 19, at 12:30, the Building Permits index will be published with a forecast of 1.5M.
At 12:30 on Thursday, July 20, the Philly Fed Manufacturing Index will publish. Also, at the same time, the US unemployment claims index (Prev: 237K | Fore: 242K) will be published as usual every Thursday. Later at 14:00, the Existing Home Sales index will be released.
The data and indicators that will publish this week for the US dollar cannot change the direction of the Federal Reserve's policies and will not be associated with high fluctuations at the time of publication. Generally, in the initial moments of the news release, if the mentioned data publish better than the predictions, it will cause the US dollar to strengthen, and it will cause the US dollar to weaken if published less than the predictions.
The Fed's shutdown period began on Saturday, July 15, and policymakers cannot discuss monetary policy until the interest rate situation announcement on July 26. Therefore, technical developments could lead the way in the coming week.
The Canadian Consumer Price Index y/y & m/m will publish at 12:30 on Tuesday, July 18: The BOC decided to increase the interest rate last week. However, with inflation hitting a two-year low of 3.4% in May, investors are uncertain whether Canadian interest rates will rise again, and that is why the Canadian inflation data will be significant for the Canadian dollar. If the inflation rate is lower than expected, it will weaken the CAD and will strengthen it if inflation increases.
New Zealand's quarterly and annual CPI will release at 22:45 on Tuesday, July 18: The Bank of New Zealand kept interest rates unchanged at its July meeting, signaling that rates have likely peaked. The quarterly CPI report due on Wednesday is predicted to support the decision, as inflation is expected to ease from 6.7% to 5.9% year-on-year in the three months to June.
The UK Consumer Price Index is released monthly and annually at 06:00 on Wednesday, July 19: The Consumer Price Index has come out against expectations many times this year, causing trouble for the central bank. The most noticeable problem with Britain's high inflation is that central bank interest rates have yet to peak after a nearly 5% increase. If inflation eases from 8.7% to 8.2% annually in June, there may be a reprieve for policymakers. Also, Core CPI is expected to reach 7.0% YoY. The pound, which has climbed more than 3.0% in July alone, is at risk of a sharp correction if the CPI report comes out against expectations. However, even in this scenario, the currency's outlook remains significantly bullish than its peers, as the Bank of England still has a longer contractionary path than other major central banks such as the Fed and the European Central Bank.
The European region consumer price index y/y & m/m will publish at 09:00 on Wednesday, July 19: Inflation in Europe is also on its downward path and could decrease very well. However, European inflation is still in high numbers, and the policy contractionary actions of the European Central Bank have strengthened the Euro.
Japan's monthly and annual consumer price index will release at 23:30 on Thursday, July 20: Japan's inflation report will be released on Thursday, while the possibility of a change in monetary policy by the Bank of Japan is increasing. Japan's Core CPI appears to have continued to rise. Therefore, any upside surprise in the June release could fuel speculation about the next move in July and strengthen the Japanese yen, which is having its best week since November last year.
You can view the data's previous and forecast value in the economic calendar on the Trendo trading platform.