Economic Concerns for the Week of August 15 Mount
Economic concerns continue to mount going into the week of August 15. Investors and economists will shift their focus to Wednesday when the Federal Reserve will release their minutes for their July meeting.
The minutes will be mined for clues as to the next interest rate hike.
A hike in interest rates in the United States will cause a ripple worldwide as the United Kingdom tries to rebound following Brexit. United States inflation rates will be under the microscope this week as well. The data will give investors a gauge of the world’s largest economy and its ability to handle higher borrowing costs.
The Federal Reserve will release their minutes on Wednesday at 2 P.M. ET. The minutes are from the July 27 meeting in which rates remained unchanged. Near-term risks were lessened, according to the Fed, leading to the possibility of a rate hike in the near-term. December odds of a rate hike, according to Fed funds futures, are 45%. September’s odds of a rate hike are just 9%.
The Commerce Department will release July’s inflation data on Tuesday.
Positive jobless claims released last Thursday did little to boost the dollar. Jobless claims dropped by 1,000, but the dollar remained sluggish as investors waited for retail data to be released.
Core inflation is pegged at an increase of 0.2%, while consumer prices are expected to rise 0.1% on the month. Core CPI is expected to reach to 2.3% on a yearly basis. The central bank aims for 2% core inflation or less. An uptick in inflation may push interest rates higher in the future.
Japan’s data release for the second quarter will take center stage. The country released their data on Sunday night, with the country’s growth at a near standstill for the months of April to June. The data came as a shock to investors that expected the country’s monetary policy and spending to boost the economy.
The country’s growth reached just 0.2% annualized, far below the 2% expansion experienced in the first quarter of the year. Public investment in the country was the only reason growth did not contract on the quarter.
The United Kingdom is slated to release data on Tuesday for consumer prices and inflation. Analysts forecast a rise pf 0.5% in consumer prices. The July jobs report will be released on Wednesday, with jobless rates expected to rise by 10,000. Wage growth data is expected to show a 2.4% rise in wage growth when including bonuses. Retail data will be released by the ONS on Thursday.
In early Monday trading, EUR/USD rose 0.3%. GBP/USD edged down 0.29% ahead of the country’s data release. USD/JPY was slightly lower, down 0.02%. The results were a mixed bag, with the AUD/USD up 0.44%, while the USD/CAD fell 0.29%.
Germany’s business climate index will be released early Tuesday morning.
Earlier in the month, the Bank of England lowered interest rates to record-low numbers. A downturn in the country’s economy following the Brexit vote was to blame for the country’s slowing economy, which is forecasted to fall sharply in the second half of the year.
Guest Author: Jacob Maslow