Inflation keeps softening in the US

Weekly Outlook, June 10 -14: Brace for CPI, GDP & Retail Sales This Week

Posted Sunday, June 9, 2019 by
Arslan Butt • 3 min read

The past week exhibited extreme volatility after top economic events from the United States disappointed the market. Besides that, the ongoing geopolitical tensions and trade war among the US, China and Mexico kept the market on fire. On Friday, the US President Donald Trump said that the United States and Mexico had signed an accord to bypass tariffs that were listed to go into effect on Monday. This may trigger massive volatility on Monday market open; in fact, we can also expect gaps in the market.

Looking ahead to this week’s economic calendar, UK GDP, US Inflation, Australian labor market figures, and US core retail sales remain the main highlights.

Key Economic Events This Week

Monday – June 10

The European banks will be closed in observance of Whit Monday. However, the British economy is scheduled to release GDP and manufacture production figures.

GDP m/m – 8:30 GMT
We should monitor the GDP data, which is forecast to remain unchanged at -0.1% as the British economy grew at a slower pace in Q2 2019.

Especially, after the downbeat inflationary assessment by Mark Carney & team, we can expect a drop in GDP. The Sterling is under heavy selling pressure as the BOE Gov Mark Carney hasn’t said much about the next rate hike. The rate hike sentiments are falling apart, causing bearishness in the Pound. By the way, a slight divergence in the data can cause a considerable movement in the Cable.

Manufacturing Production m/m – 8:30 GMT
Alongside, the Office for National Statistics is also due to release manufacturing production numbers. Economists are expecting a drop in production by -1.1% vs. 0.9%. Looks like, the Sterling is going to face bearish pressure on Mondy in the wake of negative economic events.

Tuesday – June 11

UK Labor Market Report

Average Earnings Index 3m/y – It’s a leading indicator of consumer inflation and shows a change in price for businesses and the government pay for labor, including bonuses. When businesses pay more for labor, the higher costs are usually passed on to the consumer, which leads to inflation.

The UK’s Office for National Statistics reported 3.2% average earnings in May, whereas, economists are expecting it to drop to 2.2% this month.

Claimant Count Change – It’s one of the most eyed economic data as it shows a change in the number of people claiming unemployment-related benefits during the previous month.

The Claimant Count Change for May revealed an extension of 24.7k, but May figures seem to get better as economists are expecting jobless claims of 12.3k, which is way lower than 24.7k. It means less number of people have claimed to be unemployed, which may also improve the unemployment rate and ultimately, the British Pound.

Wednesday – June 12

CPI m/m – 12:30 GMT
For all the newbies, the Core Consumer Price Index (CPI) covers the changes in the price of goods and services, excluding food and energy. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Lately, the US Federal Reserve Chairman Jerome Powell emphasized that recent weakness in inflation has been temporary — and the surge of core CPI to 2.1% in April supports his words.

However, the inflation figures for the month of May may pose additional hurdles for the Federal Reserve. Headline CPI increased by 0.3% m/m in April and Core CPI by 0.1% while a rise of 0.1% in CPI and 0.2% in Core CPI is on the cards this week.

Thursday- June 13

SNB Monetary Policy Assessment – 7:30 GMT

The Monetary Policy Assessment is the primary mechanism the SNB Governing Board practices to communicate with investors about monetary policy. It includes the result of their decision on interest rates and analysis about the economic conditions that affected their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.

The Swiss National Bank has held its policy unchanged since it lifted the peg beneath EUR/CHF on January 15, 2015. Since then, it sustains the Libor Rate at -0.75%, deep into negative territory. As per the market sentiment, they are not expected to modify their policy in the forthcoming meeting. However, they may start speaking about an exit plan from the negative interest rate, a move that could heighten the value of the Swiss Franc.

Friday – June 14

Retail & Core Retail Sales m/m – 12:30 GMT
For all the new members, retail sales is a primary gauge of consumer spending, which accounts for the majority of overall economic activity. In May, retail sales fell by 0.2% vs. the forecast of 0.2%%.

This month, economists are expecting a 0.7% rise in retail sales and a 0.5% rise in core retail sales. A higher number of sales indicate higher inflation and a growing economy. Therefore, the positive data will be good for the greenback.

Good luck for this week and trade with care!

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