Stocks ended the last week with gains, led by the Dow Jones Industrial Average. On Friday, July 12, major indexes rebounded from their previous day’s slump. The DJIA and S&P 500 hit record highs before losing some ground later in the session. The Nasdaq ended the week with a small gain, while the Nasdaq-100 finished slightly down after a major sell-off on Thursday.
Federal Reserve Chair Jerome Powell’s testimony before Congress boosted investor sentiment on Wednesday, increasing bets on two interest rate cuts this year, the first likely in September. Powell noted that while the labor market remains strong, it has cooled significantly. He emphasized the Fed doesn’t need inflation below 2% to begin easing but seeks steady progress toward this target.
Thursday’s CPI report showed the first monthly decline in inflation in four years, prompting a brief sector rotation as investors moved from large tech shares to small caps and sectors like materials, utilities, and real estate.
This week will be light on economic data, with the focus shifting to earnings season and economic reports guiding future Fed decisions.
Fed Chair Powell Speech — July 15, at 19:30 GMT+3
This week begins with a speech by Federal Reserve Chair Jerome Powell. The focus is on Powell, who has recently indicated that rate cuts, or at least one, are on the way, leading to rapid pricing of a September cut. It's likely that Powell will also state that the risks to the economy have become better balanced, allowing him to broaden his focus beyond just reducing inflation. He is closely monitoring signs of weakness in both the job market and the broader economy.
While signals of a rate cut are expected soon, they are unlikely to come before August.
🇺🇸 Retail Sales m/m — July 16, at 15:30 GMT+3
Another significant event this week is the release of U.S. Retail Sales data. Forecasts predict an increase to 0.4%, up from 0.1% last month. This could have a notable impact on assets such as the US Dollar and major indices like Nasdaq, Dow Jones, and SPX500.
Strong retail sales figures would suggest a resilient consumer sector, potentially boosting investor confidence and driving stock prices higher. Conversely, weaker-than-expected numbers might raise concerns about economic growth, leading to volatility in the markets.
🇬🇧 CPI and Core CPI m/m — July 17, at 09:00 GMT+3
The upcoming release of the UK Consumer Price Index (CPI) and Core CPI for the month is highly anticipated. Forecasts predict a monthly increase of 0.2%, slightly down from the previous month's 0.3%. However, on an annual basis, inflation is expected to rise to 2.4%, compared to 2% last year.
This data will be crucial for understanding the inflationary pressures in the UK economy. A higher annual CPI indicates persistent price increases, which could influence the Bank of England's monetary policy decisions. The release is expected to impact the British Pound, FTSE 100, and other key UK assets as investors react to the new inflation figures.
🇪🇺 CPI and Core CPI m/m — July 17, at 12:00 GMT+3
The week continues with the release of European consumer inflation data, a key metric the ECB will consider before making its rate decision. The CPI is expected to show a 0.2% increase for the past month, consistent with the previous month's growth. On an annual basis, inflation is also anticipated to remain unchanged.
This indicates that prices in the Eurozone are still high, suggesting it may not yet be time to lower the key interest rate. As a result, this data release could impact the Euro, DAX30, and other major assets in the region. Investors will be closely monitoring these figures for insights into the ECB's next moves.
🇪🇺 ECB Interest Rate Decision — July 18, at 15:15 GMT+3
The week concludes with the European Central Bank's (ECB) decision on its key interest rate. It is expected that the ECB will maintain the current rate. However, markets are betting on another rate cut in September, with an approximately 85% chance of the ECB reducing its benchmark deposit rate by 0.25 percentage points to 3.5%.
Policymakers, however, seem determined to keep their options open, unlike earlier this year when they clearly signaled that rate cuts would start in June. The more hawkish members of the ECB point out that annual wage growth of about 5% and services inflation above 4% are reasons to be cautious. Additionally, with unemployment at a record low of 6.4%, they argue there is no need to rush into further cuts.
That's it for this week! 👋
