Economic calendar: Focus on inflation this week

Summary:

• US and European inflation figures will be in the spotlight over the week

• Chinese manufacturing and services PMIs for August will offer more insight in terms of the country’s economic outlook

• IFO index is going to reveal German entrepreneurs’ sentiment for August

We have just seen  the new intraday all-time high on the S&P500 but it’s all good and calm on the markets? Not so much when you look at emerging economies - there’s plenty of nervousness and geopolitical tensions. With that in mind investors will need to weigh political developments carefully against some key macroeconomic data that is about to be released this week.

Monday is going to be rather calm in terms of volatility as the UK is on holiday today. Therefore, moves across currency pairs might be more disorderly which suggests that traders should be yet more attentive. As London is closed today the macroeconomic calendar looks also light with the German IFO index being the sole point of note. The data will show how entrepreneurs’ sentiments has evolved over August. The index is expected to merely improve to 101.8 from 101.7. The index measuring expectations should rise to 98.4 from 98.2 whereas the index reflecting current assessment is forecast to stay at 105.3. The data will be out at 9:00 am BST.  In the afternoon the regional manufacturing Fed index from Dallas will also be released.

What to watch over the whole week?

The US PCE inflation (Thursday, 1:30pm BST): The US Fed’s decision to increase interest rates at the September meeting seems to be a lock. However, a strong dollar reflects a belief that rate increases will be continued going forward. The US economy was strong in the first half of 2018 but the data has deteriorated somewhat as of late. The inflation reading will not change the Fed’s decision next month but together with other releases may undermine the greenback is a “softer path” in the data continues.

CPI inflation in Europe (Thursday and Friday): Just as the Fed is bound to raise rates in September, the ECB is locked in not raising rates until September 2019. Having said that, the inflation data is still among the most important in Europe as it will shape a rhetoric of the central bank. The euro has been struggling so far in August and could use a decent inflation print.

PMI indices (Friday): PMI indices disappointed in July and that disappointment seems to be continued in August after somewhat mixed readings from Europe and weaker from the US. This Friday will bring a release of the Chinese figures where the weakness has been building this year. Chicago PMI in the US will provide an update ahead of the key ISM indices.

It looks that the EURGBP successfully moved through 0.9000. The level should constitute an important support for bulls in the days to come. Source: xStation5