US CPI and Fed easing should drive sentiment

A highly volatile week has left the US dollar slightly on the defensive, while calm appears to have returned to the markets and volatility is heading towards its comfort zone after a chaotic few days. Meanwhile, recession concerns and Fed rate cut bets will remain at the heart of next week’s debate with the release of CPI and US retail sales.

The US dollar index ( DXY ) recovered most of Monday’s decline to seven-month lows near 102.00, although it could prevent a third straight weekly decline. Producer prices and the NFIB Business Optimism Index are due on August 13. Next on the US docket are weekly mortgage applications as measured by the MBA, backed by the inflation rate and the EIA’s report on US crude oil inventories on August 14. Weekly Initial Jobless Claims, Retail Sales, Philly Fed Manufacturing Index, Business Inventories, Industrial Production, NAHB Housing Market Index and ICT Longer Net Flows will all be released on August 15th. Consumer sentiment will be published on August 16.

EUR/USD just managed to add to last week’s gains, although a convincing breach of the 1.1000 psychological barrier still remained elusive. Germany’s current account results launch the weekly calendar in the region on August 12. Economic sentiment measured by the ZEW institute for Germany and the euro area will be revealed on August 13. Another estimate of second-quarter GDP growth and industrial production, all in the euro bloc, is due on August 14. On August 15, the trade balance figures for the euro area will only be published.

The gains in the latter part of the week were not enough to motivate GBP/USD to reverse leg, which reached its fourth straight week on Friday. The UK labor market report is due on August 13, followed by the inflation rate on August 14. UK GDP readings, goods trade balance, industrial production, manufacturing output and the NIESR monthly GDP monitor are all due on 15 August. Retail sales will close the weekly calendar on August 16.

USD/JPY snapped five straight weekly declines, regaining some upward traction after hitting multi-month lows near 141.70 earlier in the week. Manufacturer prices and machine tool orders are due August 13th. The preliminary GDP growth rate, final industrial production and weekly foreign bond investment figures are due on August 15. The Reuters Tankan Index and the Tertiary Industry Index will be released on August 16.

AUD/USD has advanced significantly and ended a three-week losing streak, thus far encountering decent resistance near the 0.6600 mark, where the key 200-day SMA is also located. The Westpac Consumer Confidence print will take place on August 13, followed by the Q2 Wage Price Index. Consumer inflation expectations are due on August 15, followed by the release of the Australian labor market report. Finally, the Leading Index tracked by Westpac will be held on August 16.

Anticipating the economic outlook: Voices on the horizon

• The RBA’s Hauser speaks on 12 August
• The Fed’s Bostic is scheduled to speak on August 13.
• The Fed’s Harker and Musalem will speak on August 15.
• The RBNZ’s Orr will speak on August 16, supported by the RBA’s Bullock and the Fed’s Goolsbee.

Central Banks: Upcoming Meetings to Shape Monetary Policy

• The RBNZ meets on August 14.
• Norges Bank and Bangko Sentral ng Pilipinas (BSP) will decide on rates on August 15.