With the UK in full focus last week (more on that below), this week we have inflation and retail sales to look forward to on Wednesday and Thursday respectively. Headline inflation is expected to tick up further to 2.7%, partly due to the rising oil price we have experienced over the past year (Brent Crude oil has risen from $55 per barrel up to around $78 in the past twelve months). Retail sales for August are expected to fall slightly for the month, which is unsurprising considering the strength of July due to the hot weather and the World Cup boosting consumer spending.
As we have mentioned in the past, the week following the release of the monthly US unemployment report (more on that below) is typically quite light on economic data. However there are two important central bank meetings towards the end of the week which will set expectations for interest rate policy in the UK and Europe. We’ll also see inflation numbers from Germany and the US before we get to the weekend when the party conference season kicks off with the Liberal Democrats down in Brighton.
It has been a quiet couple of weeks in regards to economic data releases. However, this week sees a step-up in activity with the closely watched US employment report and global services and manufacturing sentiment surveys for August set to occupy investors’ attentions. Additionally, as politicians return from their summer recess, we expect key political battles to return to the fore with Italy in particular focus, alongside the usual culprits of Brexit and Donald Trump.
There is not a huge amount to get excited about in this holiday shortened week, with relatively few major economic indicators released to keep investors on their toes. The highlights however include inflation and housing data from the US, a manufacturing confidence survey from China and consumer borrowing figures in the UK.
We have kicked off this week on news that Greece has completed its three-year emergency loan programme, which was part of the biggest bailout in financial history. Despite the milestone, the economy still has a long way to go before returning to a healthy status; however it’s certainly a step in the right direction. Regardless, we quickly turn our attention to the next potentially problematic event for the Eurozone: the Italian budget. There were reports last week that budget negotiations had begun, which spooked markets as investors sold off Italian bonds. A key threat of these tense negotiations, which are expected to be concluded by mid-October, is whether they stick within the fiscal limits that Brussels require.
Politics dominated news flow last week with the US escalating political tensions with China, Russia and Turkey. Investors will be keeping a close eye on how these political developments progress this week. Politics aside, it is also a busy week for economic data with a number of important data releases from the UK, US and China.
Following the last week’s busy schedule of economic data releases and central bank meetings, this week should be much quieter. The data highlights will virtually all fall on Friday, which will be discussed below. Today offers very little in terms of data; however it is worth noting that the US is expected to begin restoring economic sanctions on Iran today, following US President Trump pulling out of the nuclear deal in May.
This weekend was a stark reminder of what the end of this glorious summer will look like when it does eventually arrive. For financial markets we can expect one last action-packed week before investors retreat for summer holidays. I will be taking some time off for shared parental leave and look forward to writing again in September. Until then I will leave you in the capable hands of my colleagues.
One of the highlights of the week will be the European Central Bank (ECB) meeting on Thursday. Although no changes are expected in terms of interest rates, it will be worth watching out for comments regarding changes going forward.
A busy week lies ahead, with investors kept on their toes by a host of important economic data releases, a ramp-up in US companies reporting their second quarter earnings results and some key political events.