Focus will shift on US, CHINA CPI numbers this week. What will create volatility?

The weekly calendar will start with China and US Trade numbers on Tuesday. Further, all eyes will be on China, and US inflation data set to release on Wednesday and Thursday respectively.  Data out of China could point to deflation risks in the world’s number two economy. UK GDP numbers will have some volatility on Friday.

Important data and events scheduled during the week

 Monday – German Industrial production, various speeches

 Germany is to release data on industrial production on Monday. The report is expected to point to a decline of 0.4% compared to a contraction of 0.2% amid a slowdown in global demand, particularly from China.

The German economy slowed in the second quarter of 2023, falling short of forecasted growth, as weak spending power, increased interest rates, and a lack of industry order books all impacted the eurozone’s largest economy.

Further, Investors will also hear from other Fed officials this week, including Philadelphia Fed President Patrick Harker, Atlanta Fed President Raphael Bostic, and Fed Governor Michelle Bowman.

Tuesday – CHINA Trade numbers

China is to release trade numbers followed by July inflation data. The data are unlikely to make uncomfortable reading for Chinese authorities as it’s expected to contract by 1.7B compared to the previous contraction of 3.4 B.  China’s economy rebounded strongly in the first quarter after strict pandemic-era curbs were suddenly removed late last year, but the recovery has faltered in recent months as demand at home and abroad weakens.

Authorities have implemented a slew of policy steps in recent weeks to bolster the sputtering economy, though details have been scarce, and investors are expecting more.

on Wednesday, which is expected to indicate a dip in consumer prices amid fears over the world’s second-largest economy’s prospects.

Wednesday – CHINA CPI Numbers

Chin July inflation data will drag volatility in the market.  The headline CPI is set to fall into deflation of -0.5%. This could increase expectations of stronger stimulus by Chinese authorities have been increasing over the past few days, especially since recent PMI numbers have shown little sign of a pickup, with the latest July numbers showing that manufacturing remains in contraction

Thursday– US Inflation numbers

The market will react strongly to US July inflation numbers. The data will show whether price pressures are trending down and could give clues that the Fed is close to ending its aggressive cycle of interest rate hikes.

 US CPI has fallen from a peak of 9.1% in June last year, slowing to 3% last month, while core CPI slowed to 4.8%, a much softer number than expected. The Federal Reserve decided to hike rates by another 25bps in July, there is this sense that further rate hikes beyond July could be a big ask, especially with PPI inflation on the cusp of going negative.

Forecasts suggest that both the headline and core CPI rates will inch higher by 0.2% in monthly terms in July, which would translate into an increase in the yearly CPI rate but a decline in the core rate. The Lower than forecasted numbers would make sure that Fed policymakers will hold off raising interest rates at their upcoming September meeting after a quarter-percentage-point hike last month.

Friday – US PPI, UK GDP

The US is to release July PPI data, with core producer prices expected to rise by 2.3% from a year earlier. 

The UK is to release second-quarter GDP data on the same day. Numbers are expected to tick fractionally higher by 0.2% from a contraction of 0.1%, indicating that the overall economy remains all but stagnant. It shrank less than projected in May, after nearly stalling in the previous two months.

The Bank of England raised U.K. rates to a 15-year-high of 5.25% last Thursday, its 14th  consecutive increase, and warned that borrowing costs were likely to stay high for some time.