FX Week Ahead: UK inflation and the jobs report

The markets look to a relatively quiet trading week as far as scheduled economic events are concerned. The news from the UK will, of course, dominate the headlines in an otherwise quiet week.

Data from the UK will cover the inflation and the jobs report. This comes following last week’s preliminary GDP release.

Elsewhere, the labor market report from Australia is also due to be released. The report comes after last week’s RBA meeting. The central bank had left interest rates unchanged as widely expected.

A quiet week from the Eurozone will see the release of the final inflation figures for the month of July. Preliminary estimates showed that headline inflation and core inflation rate had increased. This could potentially bring some confidence to the ECB’s governing council as the central bank aims to close its QE purchases this year.

Data from the United States this week will see only the retail sales report lined up in a quiet week which could be dominated by the continued threat of escalating trade wars with China and some repercussions with the sanctions put on Iran and Russia.

Here’s a quick recap of the economic events for the week ahead.

UK Inflation, jobs and retail sales on the tap

A busy week is in store for the UK with the line-up of some top economic events. The data over the week will cover various aspects such as inflation, the labor market, and retail sales. All of the events are somewhat tightly interlinked. Therefore, investors will be scrutinizing the data to gauge the state of the UK’s economy.

The data comes amid renewed concerns on Brexit. Last week, the pound sterling extended losses as investors grew concerned that the UK could leave the EU with no Brexit deal in hand. This is expected to potentially weaken the UK’s bargaining power.

However, for the most part, it is likely that the concerns have been mere over-reaction. Still, in the backdrop of the Brexit theme, the economic data is unlikely to make any major impact on the exchange rate. The report comes just a few weeks after the Bank of England hiked interest rates.

Earlier in August, the Bank of England hiked interest rates by 25 basis points. The rate hike, which was originally scheduled for May was postponed to August. Despite raising rates, the BoE said that further rate hikes would be gradual. The markets have interpreted the signal as the BoE’s one and done rate hike for this year.

The economic data covers the period of July and marks a time when the UK’s interest rates were at 0.50%. Therefore, to a certain extent, investors are likely to shrug off the data in light of the rate hike in August and also about Brexit.

Australia to report on the monthly unemployment figures

The week ahead is relatively quiet for the Australian dollar. The main headline release will be the monthly labor market statistics for the month of July. The report is expected to be released on Thursday, 16^th August by the Australian Bureau of Statistics.

According to the economists polled, the Australian unemployment rate is forecast to remain unchanged at 5.4%. The monthly net jobs added to the economy are forecast to add 15.3k jobs during the month.

Ahead of the unemployment report, a key statistic will be released on Wednesday. The quarterly wage price index report for the second quarter is due. The report is expected to show that wages grew at a pace of 0.6% in the second quarter.

This marks a modestly higher increase compared to the 0.5% gain registered in the previous quarter. The RBA is likely to closely watch this report as it could potentially signal any underlying pressures in wages. Higher wages are required in order for the Australian consumer price index to push higher closer to the RBA’s inflation target band.