UK inflation fell under 8% for the first time in 12 months this week and that led to expectations falling for even more aggressive BoE rate hikes. With GBP longs very stretched into the meeting, GBP weakness was anticipated on a lower-than-expected inflation print. China’s GDP missed the market’s forecast, but does this simply increase the prospect of more stimulus from China’s government and the PBoC? Governor Ueda pushed back against those expecting a further tweak to the BoJ’s policy sending the JPY lower mid-week ahead of key Japanese inflation data on Friday.
Other key events from the past week
- GBP: Inflation fears fade, July 19: Although UK headline inflation remains at 7.9%, it still fell below market expectations which allowed the GBP to fall from very stretched long positions. BoE next meets on Aug 3.
- China: Peak pessimism passes? July 17: China’s GDP came in at 6.3% y/y, above the 4.5% y/y prior reading, but below the 7.3% forecast. This rattled sentiment to start the week, but is China offering value now for long-term buyers?
- JPY: Ueda pushes back, July 19: BoJ’s Governor Ueda said this week that there was ‘still some distance to sustainably achieve the 2% inflation target’ which weakened the Yen. Watch incoming inflation data out on Friday for JPY volatility.
Key events for the coming week
- USD: Fed rate decision, July 26: Short-term interest rate markets are pricing in over 95% chance of a 25bps rate hike from the Fed next week. However, markets will be looking to see if Fed signals another rate hike for September.
- Seasonal Insights: Strong gold seasonals ahead. Will they play out again this year?
- USD: US Core PCE, July 28: The US Core PCE print is the Fed’s preferred measure of inflation and has been since around 2012. Gold and silver investors will be watching this print closely as a big miss could lift gold and silver prices.