CONSUMER INFLATION DATA MAKES HEADLINES
Consumer inflation data from both sides of the Atlantic will make headlines on Friday, feeding into expectations about monetary policy.
Action begins at 06:00 GMT with German inflation figures. The consumer price index (CPI) is forecast to rise 0.4% in July, which translates into a year-over-year gain of 1.7%. Germany’s harmonized index of consumer prices (HICP) is expected to come in at 1.5% year-over-year.
Later in the day, France, Spain and Italy will also release their latest batches of inflation figures for the month of July.
In North America, the Labor Department will also issue CPI data for July. US consumer prices are forecast to rise 0.2% on month and 1.8% annually. If forecasts hold, that would mark a notable improvement over June’s 1.6% annual gain.
So-called core inflation, which strips away volatile goods such as food and energy, is expected to climb 1.7% in the 12 months through July.
It’s important to note that, whilst CPI is crucial from the perspective of monetary policy, the Federal Reserve bases its decisions on the core personal consumption expenditure (PCE) index.
On the policy front, a pair of Fed speakers will deliver public remarks on Friday, beginning at 13:40 GMT with Robert Kaplan – the President of the Federal Reserve Bank of Dallas. Later in the day, Minneapolis Fed President Neel Kashkari will also deliver a speech.
Kaplan and Kashkari are members of this year’s Federal Open Market Committee (FOMC), which is responsible for setting interest rates. The FOMC will hold its next policy meeting on 19-20 September.
Oil traders will be keeping a close eye on the weekly rig-count report from Baker Hughes Inc., which is due at 17:00 GMT.
US oil prices fell below $49.00 on Thursday and continued lower at the start of Friday’s session. Meanwhile, precious metals surged to more than two-month highs on geopolitical risks.
The euro steadied on Thursday following a series of volatile moves, with the EUR/USD exchange rate consolidating around 1.1770. Prices are teetering just below a bearish 20-day simple moving average. However, prices remain well supported above the 1.1690 level, pointing to the possibility of further upside in the short term.
Gold prices made new highs on Thursday, as risk aversion drove investors into the safety of precious metals. Bullion is riding more than two-month highs, but the real test will come just ahead of the crucial $1,300.00 level. Gold has failed repeatedly to overtake this level, triggering a broad reversal each time.
Crude oil declined sharply on Thursday amid persistent fears about a global supply glut. US West Texas Intermediate (WTI) futures continued lower in overnight trade, falling 0.7% to $48.25 a barrel. That’s the lowest level in two weeks.