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The CPI release is the most closely watched economic event of the week, as it will provide fresh insights into U.S. inflationary pressures. The core CPI, which excludes volatile items like food and energy, is forecast to increase 0.2% month-on-month and 3.0% year-on-year, while headline CPI is expected to rise by 0.2% monthly and 2.7% annually.
Investors and policymakers will analyze this data to determine if inflation remains stubbornly high or is moderating, which will guide Federal Reserve interest rate decisions in the coming months. If inflationary pressures persist, the Fed may hold off on rate cuts or even raise rates further. Conversely, a softer CPI might strengthen expectations for a rate cut in September 2025.
The RBA is expected to announce a 25 basis point rate cut, reducing the cash rate to 3.60%. This move comes in response to a slowdown in Australian economic growth and easing inflation, signaling that further monetary stimulus may be necessary to support the economy.
The rate cut is likely to put downward pressure on the AUD/USD, potentially making the Australian dollar less attractive to investors. The market will be closely watching the RBA’s guidance for any indications of future rate cuts or additional easing measures. The RBA’s press conference will be crucial for understanding the rationale behind the decision and its outlook on inflation and employment.
Following the CPI data earlier in the week, the PPI release will provide further insight into wholesale price pressures. Core PPI is expected to rise 0.1% month-on-month, indicating moderate inflation at the producer level.
Since PPI typically precedes CPI, a stronger-than-expected print could signal that inflationary pressures are building at the manufacturing and wholesale levels, which might eventually lead to higher consumer prices in the coming months. This would influence Fed expectations, as sustained inflation at the wholesale level could delay any potential rate cuts. Conversely, a softer PPI reading would reinforce the view that inflation is under control, potentially prompting a more dovish Fed stance.
The July Retail Sales report is expected to show a 0.4% month-on-month increase, providing insight into consumer spending trends. Since retail sales are a major contributor to U.S. GDP, any surprises in the data could significantly influence U.S. growth forecasts.
A stronger-than-expected retail sales report would suggest that U.S. consumers remain resilient, even amid higher borrowing costs and inflation. This would likely be bullish for stocks and could delay expectations for Fed rate cuts. Conversely, a weaker-than-expected figure might indicate weakening consumer confidence, raising concerns about future GDP growth and boosting expectations for rate cuts.
Australia's July employment data will be a crucial indicator of the health of its labor market. Analysts expect an increase of 13,000 jobs, with the unemployment rate forecast to remain steady at 4.2%.
A higher-than-expected job gain would signal a strong labor market, potentially offsetting negative economic trends and easing pressure on the RBA to cut rates further. Conversely, a weaker-than-expected report could reinforce market expectations for a rate cut in the near future. Employment data is closely tied to consumer confidence and broader economic conditions, making it a key factor for future RBA policy decisions.
The UK unemployment rate is expected to remain steady at 4.7%, with average earnings forecast to grow by 5.0% year-on-year, indicating tight labor market conditions despite ongoing economic challenges.
Q2 2025 GDP growth is expected to show a modest 0.1% quarter-over-quarter and 0.7% annual expansion. This suggests that the UK economy is still in recovery mode but is facing significant hurdles, including the aftereffects of Brexit and inflationary pressures.
A weak GDP figure could signal stagnation, putting pressure on the Bank of England (BoE) to reconsider its rate policy. On the other hand, strong employment data would suggest that the UK labor market remains resilient, despite broader economic slowdown.
Eurozone GDP for Q2 2025 is expected to show 0.1% quarter-over-quarter growth, highlighting a sluggish recovery across the region. Ongoing economic struggles in countries like Germany and Italy are likely to weigh down the overall numbers, even as countries like Spain report stronger-than-expected growth.
Weak GDP data could prompt the European Central Bank (ECB) to maintain its dovish stance and keep interest rates low to support growth. The Eurozone remains vulnerable to various external risks, including trade uncertainties, geopolitical tensions, and the ongoing impact of high inflation.
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