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Did UK inflation pick up in July?

Has inflation in the UK increased in the past month?

Rising oil and gas prices, coupled with rising food costs, are weighing heavily on the UK economy. In June, inflation in the country reached a new 40-year high of 9.4 percent, above levels in the eurozone and the US.

Inflation data for July will be released on Wednesday, with economists polled by Reuters expecting the consumer price index to rise 9.7 percent year-on-year. British households are expected to face an average annual energy bill of more than £5,000 next year as Russia’s war in Ukraine puts a strain on oil and gas supplies to Europe.

Earlier this month, the Bank of England warned that inflation in the UK is expected to hit 13 percent and the country could slip into recession by the end of the year. The bank raised interest rates by 0.5 percentage points to 1.75 percent in an attempt to dampen demand and stem rising inflation.

Vasileios Gkionakis, head of G10 currency strategy at Citi, said inflation in the UK will “probably turn out to be stickier as a result of Brexit, which will [the] BoE’s policy.”

According to figures released this week, the US consumer price index rose 8.5 percent in July from a month earlier.

“The US doesn’t have as acute an energy problem as the UK,” said Lyn Graham-Taylor, senior interest rate strategist at Rabobank, adding that the Bank of England finds it “sacrificing the economy” by cutting interest rates in order to keep up with rising inflation. to the target of 2 percent. Nikou Asgaric

What will retail sales tell us about the state of the US consumer?

US retail sales for July are expected to provide market participants with insight into consumer confidence early in the third quarter – a key data point after two quarters of contraction.

Economists polled by Bloomberg predict that the Commerce Department will report a 0.2 percent increase in total July retail sales in July from the previous month, slowing growth from the 1 percent increase recorded for June. was reported.

Part of the difference can be attributed to the decline in gasoline prices since June, when the average cost for a gallon at the pump peaked at more than $5. The movement between June and July is less strong as car and petrol prices are stripped down, although there is still a slowdown: the Bloomberg poll indicates a 0.3% increase is expected in July, compared to 0 .7 percent in June.

Analysts at Bank of America suggest it is possible that the decline in gas prices – which was evident in a slowdown in annual consumer price inflation in July – could have boosted consumer spending in other sectors of the economy. Those analysts forecast a 0.9 percent month-over-month increase in retail sales, net of the effects of spending on cars, gasoline, construction materials and restaurants.

The data comes in the wake of a red-hot jobs report for July and a second consecutive quarter of gross domestic product contraction in the April-June period, the combination of which has left a somewhat muddled picture of the state of the U.S. consumer.

“After the second consecutive contraction in real GDP during the second quarter, the moderation in inflation and the sustainability of consumption will determine how the third quarter will play out in terms of realized growth,” said Ian Lyngen, head of US interest rate strategy. at BMO Capital Markets. Kate Duguid

Has the dollar turned?

The US dollar has shed a tear. The Federal Reserve’s aggressive rate hikes aimed at curbing inflation have helped the greenback soar to its 20-year high in recent months. Yet economists are divided on how much further the currency has yet to run.

The latest data on the US consumer price index, which investors have been watching closely for clues as to how far the Fed will raise borrowing costs, showed signs of stabilization in July. Wall Street stock markets rose in response and the dollar index — which measures the dollar against a basket of six other currencies — is down about 3 percent since its July 14 peak.

“Barring a significant upward price hike in interest rate expectations or a resurgence in hard landing fears,” Société Générale’s Kit Juckes said Friday, “the dollar has peaked for good, depending on what happens elsewhere.”

Others are less certain: More than 70 percent of currency strategists surveyed by Reuters in early August thought the dollar’s strength had not yet peaked, though a third of those polled said it would within the next six months. .

ING’s Christopher Turner is among those who believe the dollar will remain strong through the end of the year, arguing that he tends to benefit from high inflation, slowing economic growth and “flat/inverting US yield curves like we see them.” have now” – referring to the scenario where short-term government bond yields are higher than longer-term bond yields.

“It’s only when investors become convinced that the Fed is willing to stimulate, not slow down, the US and global economies that the dollar should depreciate,” Turner said. George Steer

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