ATFX Forex Outlook: US CPI and Beige Book Incoming, Combined with Canada's Decision, Set to Ignite This Week's Market
ATFX Table▲
This Tuesday: US CPI Data
This Tuesday at 20:30, the US Bureau of Labor Statistics will release the unadjusted annual CPI rate for June, with the previous figure at 4.2%, the forecast at 3.8%, expected to drop by 0.4 percentage points; the unadjusted annual core CPI rate for June will be released simultaneously, with the previous figure at 2.9% and the forecast unchanged. The expectation of a decline in the annual CPI rate while the annual core CPI rate is expected to remain flat indicates that energy and food prices are the core factors affecting the June inflation rate.
ATFX Chart▲
In June, the WTI price fell from an opening price of $88.5 to a closing price of $70.03, a drop of over $18. Energy prices directly affect gasoline and fuel oil prices, and indirectly affect transportation costs in transportation services and utility fuels in the housing component. The decline in WTI prices in June is highly likely to lead to a resonant decline in the June annual CPI rate, with a high probability of market expectations being realized.
This Wednesday: Bank of Canada Interest Rate Decision
This Wednesday at 21:45, the Bank of Canada will announce the results of its July interest rate decision, with the mainstream expectation being to maintain the benchmark rate at 2.25% unchanged. At 21:45, the Bank of Canada will release the interest rate decision and Monetary Policy Report, focusing on the analysis and forecasts regarding inflation, employment, and the interest rate path in the report. At 22:30, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will hold a monetary policy press conference, which may be the most volatile period for USDCAD that day.
Chart 1, Canada Unemployment Rate, Core CPI Annual Rate, GDP Growth Rate Overlay - ATFX
The Bank of Canada's monetary policy adjustments are based on macroeconomic demand. As can be seen from the chart above, after 2022, Canada's annual GDP rate, unemployment rate, and annual core CPI rate have all been relatively stable, with no further sharp fluctuations. The latest annual GDP rate is 0%, indicating macroeconomic stagnation; the latest unemployment rate is 6.5%, above the 5% warning level; the annual core CPI rate is 2.2%, indicating moderate inflation. Overall, Canada's various economic indicators are stable, but macroeconomic growth is weak, the unemployment rate is relatively high, and only the inflation rate data is performing well. In the long run, the Bank of Canada may face the risk of an interest rate cut.
This Thursday: Federal Reserve Beige Book
This Thursday at 2:00, the Federal Reserve will release the fifth Beige Book of the year. The Beige Book is published eight times a year. Each Federal Reserve Bank collects anecdotal information on current economic conditions within its district through interviews with key business contacts, economists, market experts, and other sources.
Chart 2, Federal Reserve Beige Book Cover Page - ATFX
Statistically, after the release of the Beige Book, market volatility is relatively subdued, and there is no phenomenon of volatility sharply expanding as seen during non-farm payrolls or CPI data releases. The Beige Book provides a perspective for observing the details of the US economy, and its impact on the market is reflected in the long term, which is crucial for judging changes in the Federal Reserve's monetary policy.
This Thursday: UK GDP Data
This Thursday at 14:00, the UK Office for National Statistics will release the three-month average GDP data up to May, with the previous figure at 0.7%, the forecast at 0.5%, expected to decline slightly. The seasonally adjusted goods trade balance for May will be released simultaneously, with the previous figure at a deficit of £26.046 billion, and the forecast at a deficit of £23.2 billion, expected to narrow.
Chart 3, UK Data Release Calendar - ATFX
Both GDP data and the trade balance serve the Bank of England's monetary policy adjustments. The decline in the three-month average GDP for May in the UK indicates a slowdown in macroeconomic growth, reducing the likelihood of a Bank of England rate hike. The narrowing of the UK's trade deficit is conducive to promoting the appreciation of the pound. It should be noted that the core basis for monetary policy adjustments remains inflation data, while GDP and trade balance data have weaker predictive power for future interest rate trends.
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