Traders will be looking forward to a raft of key data announcements across major economies in the coming days. US data has been thin on the ground in the past week, but, next week we find a raft of tier one data points to move markets.
Watch for:
- North America – US CPI inflation, US Industrial Production, US Retail Sales, Michigan Sentiment; in addition to Canadian inflation
- Europe & Asia – UK CPI & Retail Sales; China Industrial Production & Retail Sales, Australian unemployment and New Zealand GDP.
- LatAm – Colombia Industrial Production & Retail Sales
North American data:
- US CPI (Tue 14th September 1230GMT) headline CPI forecast to increase by +0.4% in August, core CPI up by +0.3%.
- US Industrial Production (Wed 15th September 1315GMT) to increase by +0.4% in August
- US Retail Sales (Thu 16th September 1230GMT) headline August sales forecast to fall by -0.7%, with core sales (ex-autos) falling by -0.1% on the month.
- University of Michigan Sentiment (prelim) (Fri 17th September 1400GMT) expected to drop slightly to 70.3.
US CPI inflation started to show signs of topping out in July and consensus forecasts suggest a similar story playing out again in August. Headline CPI growth of +0.4% with the core growth of +0.3% implies year on year data rolling over. Any downside surprise would reduce the pressure on the Fed to taper, even if the focus is more on the labor market right now.
US Industrial Production is expected to grow by +0.4% for the month in August, which would keep year on year production over +6% higher. It is also worth keeping an eye out for the regional Fed surveys too with the New York Fed on Wednesday and Philly Fed on Thursday.
US Retail Sales sharply disappointed in July amid concerns over the delta variant and the impact of Hurricane Ida. The picture is not expected to improve much either in August, with negative monthly readings for sales on both a headline (-0.7%) and a core (-0.1%) basis.
Looking at the Michigan Sentiment data, the outlook for the consumer looks a little wobbly too. A massive negative surprise for August with a decline to a 10 year low is not expected to improve in September. We know that the Fed does keep an eye on the major confidence indicators, so any further deterioration will be raising an eyebrow or two on the FOMC. The Expectations component may be the one to watch here.
Market Reaction:
- USD volatility elevated around these key tier one data points throughout the week. Anything that paints a picture of confirming a December taper (strong US data will be USD positive) or perhaps pushing the taper into 2022 (on weak US data, weakening USD).
- CAD moving on Canadian inflation – stronger inflation sets up the Bank of Canada for continued tapering, pulling CAD higher.
Europe & Asia:
- UK Unemployment (Tue 14th September, 0600GMT) slightly lower to 4.6% expected
- China Industrial Production & Retail Sales (Wed 15th September, 0200GMT) year on year decline to +5.8% (from +6.4%) and +7.1% (from +8.5%) respectively
- UK CPI (Wed 15th September, 0600GMT) a big jump back up to 2.9% on both headline (from 2.0%) and core (from 1.8%)
- New Zealand GDP (Wed 15th September, 2245GMT) Q2 growth of +1.5% expected
- Australian Unemployment (Thu 16th September, 0130GMT) an increase to 4.9% (from 4.6%) expected
- UK Retail Sales (Fri 17th September, 0600GMT) monthly growth of +0.8% ex-fuel expected (after a decline of -2.4% in July).
A swathe of UK data will help to paint a picture of how the economic recovery is progressing in Q3. Unemployment is expected to continue to improve, even though the end of the furlough government support is close. The Bank of England will certainly be watching out for what is expected to be a big jump higher in inflation on both core and headline CPI, just under 3%. Retail Sales are expected to bounce back in August after a significant miss of expectations during a traditionally weak July.
Elsewhere, the Chinese Industrial Production and Retail Sales are both expected to continue to fall back and this could weigh on risk appetite on Wednesday. The Aussie dollar will be impacted by this, but also watch out for the Australian employment data. With COVID lockdowns a key issue, rising unemployment is not good for AUD performance.
Market Reaction:
- GBP volatility will be elevated throughout a week of tier one data. Any higher than expected data will give hawkish signals for the Bank of England and help to support GBP
- NZD to move on GDP data, whilst AUD is always reactive to employment data.
Latin America:
- Colombia Industrial Production (Wed 15th September)
- Colombia Retail Sales (Wed 15th September)
It is a fairly quiet week for major LatAm economic announcements. Colombian Industrial Production rebounded strongly in June after the nationwide protests disrupted May’s performance. Recovery is expected to continue into the second half of the year. COVID infections and deaths seemed to peak at the end of June, whilst vaccine rates ramped up in July. This should bode well for the recovery in Colombian Retail Sales too which showed a trend of improvement in June.
Market Reaction
- COP will respond well if Industrial Production or Retail Sales show continued improvement.
