Did UK inflation pick up in July?

Has UK inflation risen last month?

Rising oil and gas prices combined with rising food costs are weighing heavily on the UK economy. In June, inflation in the country hit a new 40-year high of 9.4 percent, above the eurozone and US levels.

Inflation data for July will be released on Wednesday, with economists polled by Reuters expecting the consumer price index to rise 9.7 percent on a yearly basis. UK households are expected to face average annual energy bills in excess of £5,000 next year as Russia’s war in Ukraine puts further pressure on oil and gas supplies to Europe.

Earlier this month, the Bank of England warned that UK inflation is expected to hit 13 percent and the country would fall into recession by the end of the year. The bank raised interest rates by 0.5 percentage points to 1.75 percent in a bid to dampen demand and curb rising inflation.

Vasileios Gkionakis, head of G10 currency strategy at Citi, said that inflation in the UK “is likely to prove more stubborn because of Brexit, further complicating the situation [the] BoE policy.”

The US consumer price index rose 8.5 percent in July from a year earlier, slowing from the previous month, according to figures released this week.

“The US doesn’t have an energy problem as acute as the UK,” said Lyn Graham-Taylor, senior rates strategist at Rabobank, adding that the Bank of England must “sacrifice the economy” by raising interest rates to counter rising inflation pushing towards the 2 percent target. Nikou Asgari

What will retail sales tell us about the state of the US consumer?

US retail sales for July are expected to give market participants a glimpse of consumer confidence early in the third quarter — a key data point after two quarters of decline.

Economists polled by Bloomberg are forecasting that the Commerce Department will report a 0.2 percent month-on-month increase in total retail sales in July, slowing growth from the 1 percent increase reported in June.

Part of the difference may be due to the decline in gasoline prices since June, when the average cost of a gallon at the pump peaked at over $5. The movement between June and July is less strong when car and petrol prices are discounted, although it still shows a slowdown: the Bloomberg survey shows expectations for a 0.3 percent increase in July versus 0.7 percent in June .

Analysts at Bank of America think it’s possible that the collapse in gas prices – reflected in a slowdown in annual consumer price inflation in July – may have spurred consumer spending elsewhere in the economy. These analysts are forecasting a 0.9 percent monthly increase in retail sales, excluding the impact of spending on autos, gasoline, building materials and restaurants.

The data comes on the heels of a late-breaking July jobs report and a second straight quarter of contraction in gross domestic product in April-June, the combination of which paints a somewhat disorganized picture of the state of the country for American consumers.

“Following the second consecutive fall in real GDP in the second quarter, moderate inflation and the resilience of consumption will inform how the third quarter plays out in terms of realized growth,” said Ian Lyngen, head of US interest rate strategy at BMO Capital Markets. Kate Duguid

Has the dollar turned?

The US dollar was on a tear. The US Federal Reserve’s aggressive rate hikes aimed at curbing inflation have helped push the greenback to 20-year highs in recent months. However, economists are divided on how far the currency has to go.

The latest US CPI data, which investors are watching closely for clues as to how far the Fed will raise borrowing costs, showed signs of stabilization in July. In response, Wall Street stock markets rallied, and the dollar index — which measures the greenback against a basket of six other currencies — is down about 3 percent from its July 14 peak.

“Barring a major upward revision in interest rate expectations or revived fears of a hard landing,” Société Générale’s Kit Juckes said on Friday, “the dollar has finally peaked, depending as always on what’s going on elsewhere.”

Others are less sure: Over 70 percent of currency strategists polled by Reuters in early August thought the dollar’s strength had not yet peaked, although a third of those polled said it would within the next six months.

ING’s Christopher Turner is among those who expect the dollar to remain strong through the end of the year, arguing that it tends to benefit from high inflation rates, slowing economic growth and “flat/inverting US yield curves like we have today”. to the scenario where yields on shorter-dated government bonds are higher than those on longer-dated bonds.

“Not until investors are satisfied that the Fed is ready to stimulate, not slow, the US and global economy should the dollar fall,” Turner said. George Steer