Markets head into the new week balancing two powerful drivers: fresh US inflation data and renewed geopolitical risks in the Middle East. Ongoing disruptions around the Strait of Hormuz continue to support oil prices, raising concerns that higher energy costs could complicate the Federal Reserve's fight against inflation.
Against this backdrop, Tuesday's US CPI report will be the week's headline event. Markets expect headline inflation to remain elevated at 3.9% year-on-year, while core inflation is forecast to hold at 2.9%. A stronger-than-expected reading could reinforce expectations that US interest rates will stay higher for longer, providing fresh support for the dollar.
Investors will also closely follow Fed Chair Kevin Warsh's testimony after the inflation release for further clues on the policy outlook.
Our focus this week will be on Alpari's USDInd and Brent, both of which may be preparing for larger breakout moves as markets react to inflation data and geopolitical developments.
US inflation and Middle East risks in focus
Markets will closely monitor US inflation data alongside ongoing developments in the Strait of Hormuz, where renewed disruptions to shipping continue to fuel concerns over global energy supplies and inflation. Investors will also watch key Chinese economic data and the Bank of Canada's policy decision for further clues on the global growth outlook.
Tuesday, July 14th: US CPI and Fed Chair Warsh Testimony
The latest US inflation report could shape expectations around future Federal Reserve policy. Investors will also closely monitor Fed Chair Kevin Warsh's testimony for further guidance on the outlook for interest rates and inflation.
Wednesday, July 15th: China GDP
China's second-quarter GDP report will provide an important update on the world's second-largest economy. The figures could influence global risk sentiment and demand expectations across commodity and currency markets.
Wednesday, July 15th: Bank of Canada Rate Decision
The Bank of Canada is expected to leave interest rates unchanged. Markets will focus on policymakers' assessment of inflation and economic growth for clues on the future policy path.
Thursday, July 16th: UK GDP
The latest UK growth figures may influence expectations around Bank of England policy and drive volatility in the British pound.
Thursday, July 16th: US Retail Sales
Retail sales will offer fresh insight into the resilience of US consumer spending. Stronger-than-expected data could reinforce the view that the US economy remains resilient despite elevated borrowing costs.
Friday, July 17th: Michigan Consumer Sentiment
The preliminary July reading on consumer confidence will provide another gauge of household sentiment and inflation expectations, potentially influencing expectations around Federal Reserve policy.