Central Banks and US Inflation Data on Schedule This Week

It looks like the next week will be volatile again, despite the summer lull in the markets.

According to the most recent nonfarm payroll data from the Labor Department on Friday, the US economy added 372,000 jobs in June, more than the 250,000 forecast by experts. The unemployment rate stayed at 3.6%. After the data was announced, the US stock markets rose and the USD fell. However, sentiment quickly changed on Monday.

The rest of Monday and Tuesday are not expected to bring any significant economic news. However, on Wednesday, the Reserve Bank of New Zealand is likely to deliver a 50bps rate hike, bringing the Official Cash Rate to 2.5%.

The Bureau of Labor Statistics (BLS) Consumer Price Index (CPI), which tracks changes in consumer prices for June, will announce its latest update on Wednesday. At 8.6%, the annual headline inflation is now at a 40-year high and is predicted to rise to 8.7% in June. The monthly change is expected to increase to 1.1%. The core inflation rate, which does not include volatile food and energy costs, is anticipated to have decreased from the 6% level seen in May to a rate of 5.7% in June. Core inflation peaked in March at 6.5% and has since moderated a little.

Meanwhile, the Bank of Canada is seen raising rates by 75 bps on Wednesday, bringing the primary rate from 1.5% to 2.25%. As a result, volatility could increase in the USDCAD pair as traders will look for clues about more rate hikes in the following monetary policy statement.

The BLS will also publish its June Producer Price Index (PPI) the day after that, reflecting inflation as seen by producers. The PPI is anticipated to have increased 10.8% year over year, matching the rate from the previous month but less than the most recent peak of 11.5% seen in March. At this rate, PPI inflation is almost at a 41-year high.

The most recent retail sales data from the US Census Bureau is anticipated to be released on Friday. In contrast to the 0.3% fall seen in May, analysts predict a 0.8% monthly gain in retail sales in June. Moreover, the most recent reading can offer insightful information on consumer confidence in the face of persistently rising inflation.

Last but not least, the preliminary reading of the University of Michigan’s Consumer Sentiment Index (MCSI) is due on Friday, expected to improve from 50 to 58.