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Economic Week: US Data, Trade War Developments

Economic Week: US Data, Trade War Developments

Markets will follow closely the major economic reports released this week from major economies to see the direction of central banks’ monetary policy in the coming period, with a major focus on US inflation and retail sales data.

The Chinese government will also release data on industrial production and retail sales, which are usually of great importance, especially as the trade war between the U.S. and China intensified.

But the markets will continue to follow intensively the tensions between the United States and China as the trade war continue to shape market sentiment.

US inflation, retail sales to weigh on dollar movements

US dollar movements will depend on inflation and retail sales data, as well as any developments related to the trade war with China.

The US will release a number of reports that include the manufacturing, unemployment benefits and consumer confidence, but inflation and retail sales reports may be of great interest as they largely affect the Fed’s monetary policy decisions.

The US consumer price index (CPI) may indicate a 0.2 percent rise in July and an acceleration to 1.7 percent from a previous of 1.6 percent year-on-year.

Retail sales, which reflect household spending on goods and services, are forecast to surge 0.3 percent in July after a 0.4 percent increase in June.

It should be noted that any developments or statements related to the trade war with China would affect the movement of the dollar more than economic data.

Pound may receive another shock from economic data  

The pound fell to its lowest level in two years last week after the British economy recorded its worst contraction since 2012 in the second quarter and with rising expectations that Britain will exit the EU by the end of October without an agreement.

Reports of unemployment, inflation and retail sales from the UK economy are the most important this week, but eyes will remain open to the political situation as fears of Brexit without a deal intensified.

Analysts expect the unemployment rate to stabilize at 3.8 percent in the quarter ending June, while wage growth may fall to 3.2 percent year on year from a previous of 3.4 percent.

The consumer price index, the preferred inflation gauge of the BoE, may indicate a rise to 2.2 percent in the year ended July from 2.0 percent soar recorded in June.

Euro to get clues from the general sentiment

This week, the euro will likely be subject to general market movements due to the absence of significant economic data from the eurozone.

The euro area is to release some data including trade balance, confidence and industrial production, but the impact of the reports on the euro movement may be limited.

Perhaps the most notable report is the second reading of the second quarter GDP in the eurozone, which is expected to confirm a decline in the growth pace to 0.2 percent compared to an expansion of 0.4 percent in the first quarter.

Gold aims to hold above $1500 to resume rally

Resting upon the critical psychological level $1,400 an ounce in recent weeks, gold managed to continue its rally this year by rising above a new important level of $1500 an ounce last week, taking advantage of haven demand as the trade war fears increased and a number of global central banks cut interest rates.

This week, gold is likely to remain dependent on the market sentiment. In the event of heightened tensions, gold may continue to benefit as a safe haven and thus will be looking forward to breaking new record highs.

Concerning oil, prices continued to fall last week after the International Energy Agency said the trade war between the United States and China caused global oil demand to grow at its slowest pace since the 2008 financial crisis.

The US government report released last week also pointed to an unexpected rise in US crude inventories by 2.4 million barrels in the week through August 2, adding to the negative pressure on oil prices.

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