All eyes are on the upcoming US CPI report this week, but before that, the UK will also release its inflation data. Due to base effects, it is expected that the UK’s headline annual inflation will rise from 2.0% in June to 2.3% in July, marking the first increase since December last year. This aligns with the view that central banks are anticipating some bumps in the disinflation process.
The core annual inflation reading is projected to remain steady at 3.5%, which could help ease concerns among traders. However, an unexpected increase could lead to jittery risk trades ahead of the US CPI report later in the day. The Bank of England recently made a rate cut and stated that continuous cuts should not be expected, with only a 36% chance of another cut in September currently priced in by traders.
The UK inflation report could have a significant impact on market sentiment, potentially keeping traders anxious about the upcoming US numbers. While the disinflation process in the US is ongoing, this week’s data is expected to align with the current trend. It will be crucial to watch out for any surprises that may arise and remain cautious in the market.
