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Week Ahead – US data to keep dollar in spotlight; Q2 GDP likely to get revised up

The week ahead will be relatively light in terms of major data with the exception of the United States, which has a busy calendar for the coming week. Figures for new home sales, durable goods and personal spending could prove crucial ahead of the Fed’s September meeting. Second estimates of second quarter GDP data for the US, UK and Germany will also be closely watched.

The first of the GDP data will come from Germany with the final estimate for second quarter growth to be released on Tuesday. GDP growth is expected to stay unrevised at 0.4%, confirming the milder-than-anticipated pick up from the first quarter. Following the GDP data is the IFO Business Climate index. The survey for business sentiment is forecast to ease to 107.8 in August from 108.0 previously. On Friday, preliminary inflation data is out for August, with annual CPI expected to hold steady at 0.2%.

US data will start with the Conference Board Consumer Confidence index on Tuesday. July’s figure came in unexpectedly low at 90.9 and it’s expected to improve marginally in August to 92.50. New home sales are also released the same day, which is forecast to rise 6% to 511k in July from 482k previously. The housing sector has been performing strongly in recent months and housing shortages have pushed up rents across the US, making it one of the few upward pressures in the CPI components. On Wednesday, durable goods orders are forecast to show a 0.6% decline in July, following a strong surge in the previous month. Thursday’s GDP revision is likely to get a lot of attention as it is expected to get revised up to an annualized rate of 3.2% in the second quarter from the initial estimate of 2.3%. A bigger upward revision could convince the Fed that the economy is strong enough to withstand a rate increase in September. But a weaker revision is likely to keep the markets guessing as to the Fed’s next move. The data flurry will continue on Friday with the July figures for personal income and personal spending, as well as the PCE price index – the Fed’s preferred measure of inflation. With June’s figure at 1.3%, the core PCE price index has been running below the Fed’s 2% target since April 2012, and is expected to stay unchanged in July.

The UK will also see the release of second estimate of second quarter GDP, though no revision is expected to the 0.7% quarterly growth in the initial estimate. Like the US, the UK central bank has been preparing markets for the first interest rate increase since before the financial crisis but falling commodity prices and a higher exchange rate has kept inflationary pressures subdued despite falling unemployment and strengthening economic growth. UK exports have also been hurt by weak global demand, which has dragged down GDP growth. Figures out on Friday are expected to show an improvement in the second quarter, with exports forecast to rise by 2.2%, following a 0.3% drop in the first quarter.

In Japan, inflation data for July is likely to bring the Bank of Japan’s monetary policy back in focus when it’s published on Friday. The Bank of Japan has had to move back the timing of when it expects to hit its 2% inflation target as falling oil prices and weak domestic demand have pulled inflation back to near 0%. Nationwide CPI is forecast to rise by 0.2% year-on-year in July, down from 0.4% in June. The core nationwide rate and Tokyo’s forward looking August core estimate are both forecast to fall to -0.2%, putting pressure on the Bank of Japan and the government for further stimulus measures amid falling popularity for the Prime Minister Shinzo Abe’s government.

Finally, the Jackson Hole Symposium – an annual economic policy symposium – will kick off in Wyoming, US, on Thursday. This should be interesting to follow as it’s attended by central bankers, finance ministers and academics. Investors are likely to keep a close eye on the Fed’s Stanley Fischer’s speech who recently commented that inflation was ‘very low’. Disappointingly, Fed Chair Janet Yellen won’t be attending this year.

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