Markets are heading into a data-heavy week with several reports that could sway interest rate expectations and investor sentiment. All eyes are on U.S. inflation numbers and consumer spending data, as the Fed weighs its next move amid a cooling labor market and mixed economic signals. Overseas, UK growth figures will offer insight into Europe’s economic resilience, while traders brace for potential market swings driven by policy shifts and global tensions.
1. U.S. Consumer Price Index (CPI) – Aug 12, 2025
Market focus:
The July CPI print lands in an environment where the Fed’s forward guidance is deliberately ambiguous. With the policy rate already restrictive, the Fed is less concerned with level and more with trajectory. Any sustained move above June’s 2.7% YoY risks hardening “higher for longer” bets.
Current OIS curves imply only a 42% probability of a September cut, down from 55% two weeks ago, as sticky service inflation and tariff pass-through remain in play.
Data check:
June CPI: 2.7% YoY (up from 2.4% in May)
Core CPI: 2.9% YoY
Monthly change: +0.3% headline, +0.2% core
Cleveland Fed nowcast: 2.72% YoY for July, 2.86% for August
Strategic angle:
A hot CPI could push 2-year yields above the recent 4.92% ceiling and lift USD/JPY toward the 156–157 zone. A softer print would likely steepen the curve as front-end yields drop faster than the long end, repricing September cut odds above 60%.
2. U.S. Retail Sales – Aug 15, 2025
Market focus:
Retail sales are being released at a point where markets want to know if June’s +0.6% MoM rebound was a one-off or the start of a second-half demand recovery. Credit card spending data for July is running +0.4% MoM, but rising delinquencies hint at underlying household strain.
Data check:
June retail sales: +0.6% MoM, broad gains in autos & building materials
YoY nominal growth: +3.9%
Core sales (ex-autos/parts): +0.5% MoM
Real (inflation-adjusted) sales: approx. +0.4%
Strategic angle:
A strong number would reinforce the “no-landing” narrative, favouring cyclicals and potentially breaking resistance in the S&P 500 consumer discretionary sector. A miss could weaken the USD versus commodity currencies as markets lean toward a Q4 consumption slowdown.
3. UK GDP – Aug 14, 2025
Market focus:
The Q2 GDP release is less about the headline and more about whether services can offset weakness in production and construction. April and May both posted contractions, but three-month growth to May was +0.5%, suggesting some resilience. GBP rates markets are already pricing in ~40 bps of BoE cuts by year-end.
Data check:
April GDP: –0.3% MoM
May GDP: –0.1% MoM (services +0.1%, production –0.9%, construction –0.6%)
Three-month GDP (Mar–May): +0.5%
Q1 2025 GDP: +0.7% QoQ
Strategic angle:
A downside surprise would likely steepen the gilt curve and push GBP/USD toward 1.2650, especially with dovish BoE rhetoric. A strong print could pare back rate-cut expectations and lift GBP against the euro, where growth remains sluggish.
