Week of Aug 11

New tariffs on India and the possibility of a Trump-Putin meeting took the spotlight, while the BOE was more hawkish than expected, as the second quarter earnings season began to wind down.

The week ahead has several key events on the economic calendar, such as US inflation figures, followed by UK GDP and employment, as well as Japan's Q2 GDP.

Biggest Market Movers

• Crude oil prices declined 5% through the course of the week following OPEC+ raising production more than expected and amid hopes of a peace deal in Ukraine.
• Gold hit a 2-week high amid increasing dovishness among Fed officials, marking a new high for the month.
• FTSE 100 reaches a record high after strong insurer earnings.
• Nasdaq hit a record high thanks to a jump in Apple (AAPL) shares.
• GBPUSD had the strongest gains among major pairs after a hawkish cut by the BOE.

Week in Review

Geopolitics was the focus for the markets during the week, as US President Donald Trump leveraged tariffs on countries buying oil from Russia to push for a ceasefire in Ukraine.

The BOE's expected decision to cut rates by 25 bps was the major economic event of the week. But the vote split of 5-4, with the dissenters wanting to keep rates unchanged, gave the markets a hawkish surprise and supported the pound. The bank also revised up its inflation and growth forecast.

China's trade surplus shrank as imports accelerated faster than exports. China's shipments surged by 7.2% from a year ago, surpassing the expected 5.1% growth rate. Imports grew at an annual rate of 4.1%, compared to the -1.3% forecast. China also increased its imports of crude oil.

Canada's July trade deficit was the second largest on record as imports rose 1.4%. Meanwhile, exports fell 0.9% amid lower crude prices. However, the import of a large module for an offshore oil project distorted the data significantly. The data left the CAD slightly weaker.

In geopolitics, Trump doubled tariffs on India due to purchases of Russian oil and threatened similar tariffs on China if it continued to buy oil from Russia.

Reports circulated that the White House and Kremlin were organising a summit between Trump and Putin on the Ukraine situation. Trump announced he would be applying up to 100% tariffs on semiconductors, but with significant carve-outs for companies that produce or invest in the US. Trump also nominated a replacement for the FOMC member who resigned, amid reports circulating that current Fed official Christopher Waller favoured him to replace Fed Chair Jerome Powell next year.

Top Events in the Week Ahead

Trade concerns are expected to be top of mind for traders in the coming week, as Trump is expected to increase pressure on Russia over the Ukraine conflict. The focus will likely be on US inflation data to consolidate expectations around an expected Fed September rate cut.

US Inflation Keeps Rising

Tuesday's release of the US July CPI is expected to show that headline inflation was unchanged at 2.7%, but the core rate accelerated to 3.0% from 2.7%.

Traders will be looking at this closely after the Fed stressed inflation pressures at its last meeting to justify keeping rates on hold. The US PPI, coming out on Thursday, is projected to show a core rate of 2.7%, up from 2.6%, indicating persistent inflationary pressure. US retail sales on Friday are also expected to grow at 0.4% compared to 0.6% previously. If the data disappoints, gold could head towards new record highs above $3450 per ounce.

British Economy Expected to Keep Struggling

The UK will release an avalanche of economic data, with the most critical release being Thursday's preliminary Q2 figures, given the upward revision in GDP.

The British economy is expected to have decelerated to 0.3% growth in the second quarter, compared to 0.7% growth in the first quarter. June's monthly GDP is expected to rise at 0.1%, up from -0.1% the month before. The unemployment rate will be reported on Tuesday, expected to tick down to 4.6% from 4.7%, potentially complicating the BOE's narrative that there is slack in the labour market. The cable has resistance at the 13500 handle, which coincides with the 50-day moving average.

Japan's GDP is Normalising

The preliminary reading of Q2 GDP for Japan on Friday is expected to show a growth rate of 0.2%, up from 0.0% in the first quarter. A modest growth rate would give the BOJ more room to consider raising interest rates, as they have been discussing. Support sits at around 146.00 for USDJPY, which lies where the 50-day moving average is located.

Other Events and Earnings

Tuesday has Australia's ANB business confidence as well as Germany's ZEW economic sentiment index. Australian wage price figures for Q2 come out on Wednesday. Thursday includes new Chinese loans and a second look at the Euro Area Q2 GDP figures. Friday sees China's retail sales and UK industrial production.

The second quarter earnings season comes to an unofficial close this week, with notable names updating investors, including CoreWeave, Cardinal Health, PageGroup, Antofagasta, Cisco, Applied Materials and Deere.