Morning Brief – The Week Ahead

This week markets look to the United States CPI and PPI reports, with expectations slightly anchored to the downside, as economists believe that the US may have seen “peak inflation.”

Markets are expecting a 0.5 percent monthly increase in US CPI. The year-on-year figure is expected to show an 8.9 percent increase. Both are below last month’s price rise.

Should we see weaker inflation metrics from both CPI and PPI in the US then we could see a significant market reaction as traders and investors reprice the market.

This type of trade, if the inflation numbers are less than expected, could see the US dollar moving higher, stocks moving higher, and bond yields starts to fall.

We could also expect to see other trends starting to emerge in gold and Bitcoin. Both are closely linked to the inflation and rate hike narrative. Non-yielding gold could be a huge beneficiary.

This week we could see the UK economy posting negative growth figures. This would not be unexpected given recent political issues and the trouble the economy has with energy and COVID.

Last quarter the British economy unexpectedly expanded 0.5% month-over-month in May of 2022, recovering from a 0.2% contraction in April, and beating market forecasts of a flat reading.

The construction sector expanded 1.5%. On the other hand, output in consumer-facing services fell by 0.1%, driven by a 0.5% drop in retail trade and a 5.3% slump in sports, amusement, and recreation activities.

With the recent set of rate hikes from the Bank of England it will be interesting to see how the economy grew in the face of rising rates and also inflation. Inflation could certainly harm growth in the UK.

This week we also see sentiment data from the US economy The Michigan Consumer Sentiment survey is expected to slightly improve on last month’s number.

The survey is a market moving, and it will likely cap-off a busy week for financial market. The inflation reports will undoubtedly set the tone for market mid-week onwards.