Week of July 14

The highlights of the last week include the minutes from the previous FOMC meeting, as well as the RBNZ and RBA keeping rates unchanged, and the UK's disappointing monthly GDP.

The week ahead includes the release of China's Q2 GDP, as well as the US, Japan, and UK CPI changes, with trade developments still likely to dominate headlines.

Week in Review

With a relatively light economic calendar, the trade war dominated the headlines last week.

The highlight of the week was the release of the minutes of the latest FOMC meeting, which revealed that a "couple" of members were considering rate cuts as soon as July if the data evolved as expected. The consensus, however, still viewed inflation risk to the upside.

The RBA surprised the market, which had been expecting a rate cut, by keeping rates unchanged, citing heightened uncertainty as a reason to wait for more information before easing monetary policy. The Board adjusted its statement to include a commitment to full employment, in addition to reiterating its mandate for price stability.

The RBNZ kept rates unchanged as expected but warned that inflation could rise to the top of its target rate by next year.

UK GDP growth in May disappointed at -0.1% instead of the +0.1% expected, with the trade deficit widening more than anticipated and industrial production falling more than had been forecast.

German industrial production rose 1.2% in May instead of the -0.6% that had been forecast.

In geopolitics, markets initially breathed a sigh of relief after the Trump administration announced that "reciprocal tariffs" wouldn't take effect until August 1st, effectively extending the moratorium. However, the White House sent out "letters" imposing tariffs similar to the terms given in April, which left markets uncertain. On Tuesday, Trump threatened a 50% tariff on copper and an identical tariff on Brazil, rekindling concerns about trade. But throughout the week, there was optimism regarding reports of advances in trade talks, particularly with the EU.

Biggest Market Movers

• FTSE 100 rose 2% to a record before pulling back as mining and healthcare stocks rose, with higher copper prices supporting the materials sector.
• Nasdaq hit a record high after Nvidia crossed the $4 trillion market capitalisation threshold, becoming the first company in history to do so.
• BTC rose to a record high of $119k by the time of writing on Friday on the back of a surge in institutional investor demand.
• The yen saw the most significant move among major currencies, weakening around 2% against the dollar after reports of little progress in trade negotiations with the US.

Top Events in the Week Ahead

The coming week features a fairly busy economic calendar, which may help break up potential trade negotiation announcements; markets are expecting a potential US-EU deal. Early in the week, the focus will be on China's Q2 GDP figures, which are expected to show an annual growth rate of 5.3% compared to 5.4% in the first quarter.

North American Inflation to Pressure Central Banks

Inflation reports are expected to be the highlight of the week, with the US reporting first on Tuesday. It is expected to show that June headline inflation ticked up to 2.5% from 2.4% previously. Core inflation is projected to have risen by a similar amount, from 2.8% to 2.9%. Canada is also expected to report on Tuesday, with the BOC's preferred measure, the trimmed-mean CPI change, expected to decelerate to 2.75% from 3.0% previously. The loonie is trading below the 50-day moving average at 1.3750, but this may change. The following resistance levels lie at 1.3800 and 1.3860, while supports remain at 1.3650 and the 1.3600 handle.

Energy Complicates Things for BOE

UK inflation is also expected to accelerate when it is released on Wednesday, with the headline rate expected to rise to 3.7% from 3.4% in May. However, the bulk of those gains is expected to come from higher energy prices. The Core inflation rate is also expected to tick up to 3.6% from 3.5% previously. On Thursday, the ONS is expected to report that British unemployment in May remained unchanged at 4.6%, with average earnings decelerating slightly to 5.1% from 5.2% previously. The UK is projected to have added 110K jobs in June, up from 89K the month before. Cable eyes support at the 50-day moving average of 1.3500. If it holds, a bounce could see prices reclaim 1.3600 and 1.3700, whereas a breakdown may expose 1.3400 and the local low at 1.3375.

Japan Indicators Stabilising

June inflation for Japan is expected to remain unchanged at 3.5%. Still, the core rate is expected to accelerate to 3.8% from 3.7% prior, as Tokyo struggles to make headway in trade negotiations with the US. The trade deficit is meanwhile expected to shrink substantially to -$100 billion from -$638 billion a month earlier, as exports return to positive at +2.0% from -1.7% and imports moderate their decline to -5.0% from -7.7% prior. At this pace, weaker data could see prices revisit the 148.00 handle, opening the door to the 200-day moving average of 149.65. On the other side, support lies at 146.00, followed by the 50-day moving average of 145.75.

Other Events, Earnings

Monday marks the release of new Chinese loans. The Australian Westpac consumer confidence index is released on Tuesday. The Euro Area trade balance is expected to be released on Wednesday. Thursday includes US retail sales figures. Friday sees US housing starts.

The week ahead marks the unofficial start of Q2 earnings season on Tuesday, with reports from major US banks, including JPMorgan, Wells Fargo, Citigroup, and Bank of New York Mellon. Other significant earnings expected include those from Fastenal, Johnson & Johnson, Bank of America, ASML, Netflix, GE Aerospace, Novartis, American Express, Antofagasta, and Johnson Matthey.