Today's economic calendar brings two significant data releases that could influence currency and broader financial markets. In the European session, attention will be on the United Kingdom's Gross Domestic Product (GDP) data for July. Analysts generally anticipate a flat growth rate of 0.0% for the month. This figure is unlikely to significantly alter the Bank of England's current policy stance, as most policymakers appear to favor a patient approach to monetary adjustments. However, market participants have recently increased their expectations for interest rate hikes, partly in response to rising oil prices, with two further rate increases now largely priced in before the year concludes, starting in November.
For retail forex and CFD traders, these data points can introduce volatility in currency pairs involving the British Pound (GBP) and the US Dollar (USD), as well as indices and commodity-related instruments. Understanding the market's pre-existing expectations is crucial, as actual figures deviating from these forecasts often trigger immediate price movements.
US Inflation Data Takes Center Stage
Later in the American trading session, the focus will shift to the United States with the release of the Consumer Price Index (CPI) report. The headline year-over-year CPI is projected to remain steady at 3.4%, matching the previous month's reading, while the month-over-month figure is expected to rise to 0.4% from 0.1%. Core CPI, which excludes volatile food and energy prices, is forecast to show a year-over-year increase of 2.4%, a slight decrease from the prior 2.5%, with the month-over-month core reading anticipated at 0.2%, consistent with the previous period.
The core month-over-month CPI reading is particularly watched by Federal Reserve officials, as it provides a clearer picture of underlying inflationary pressures. Recent comments from Fed members have highlighted the significance of this metric. For instance, a notable Fed governor previously indicated a willingness to consider a rate hike in September if the monthly core inflation surprised on the upside. However, this perspective predates the recent sharp increase in crude oil prices, with West Texas Intermediate (WTI) crude now trading above the psychological $100 per barrel threshold. The breach of this level has generally led to a more hawkish re-evaluation of future interest rate probabilities across financial markets.
Overall, today's economic releases offer key insights into the health of the UK economy and the ongoing inflation battle in the US, providing essential context for market participants.
📰 Based on reporting from: ForexLive →