The beginning of this week turned out to be quite calm in terms of economic events. Trading was focused on calibrating the chances of the autumn round of tariffs and the subsequent easing of the Fed’s credit conditions. Regarding events with immediate development, which are fraught with increased geopolitical instability, one can single out protests in Hong Kong and rehearsals of the authorities to suppress the rebellion.

Starting on Tuesday, the focus again falls on economic data, mainly on consumer inflation in the US and Eurozone GDP on Wednesday for the second quarter. The data will be scrutinized for signs of further decline in German production which is now the biggest risk factor for the whole EU economy. The ECB becomes increasingly focused on the German economy and we have to follow it.

The recent shock in industrial production is comparable to the extent of the fall during the last crisis in 2008:

On Thursday, there will also be data on US retail sales, which in the case of a positive change (as it was in the previous month) will increase the risk of inflation overshooting from the policy of continued rate cuts. It will make it harder for the Fed to cut rates. Nevertheless, the market is growing stronger in the belief that the Central Bank will continue to cut rates at a cautious pace.

Consensus on core consumer inflation in the US is 0.2% MoM, which will be enough to keep annual inflation at 2.1%. As for the manufacturing trend, on Thursday, it’s worth paying attention to data on industrial production, the Empire Manufacturing index and the business climate forecast from the Federal Reserve Bank of Philadelphia. On Friday, the first assessment of consumer sentiment from W. Michigan will be released.

German economy output is expected to decline by 0.1% after growing 0.4% in the first quarter. Passenger car production, the main export item, which accounts for 18% of the total, fell in July to a historic low:

Assessments of current conditions and the future business climate from ZEW suggest that the slowdown in German production in the second quarter are likely to materialize. Assessment of current conditions fell to a minimum since 2010 (-13.5 points), expectations were slightly less bad – at the level of -44.1 points. Both indicators fell short of expectations. ZEW report also contained new risk factor for the EU economy – “competitive devaluations”.

Considering the weak UK GDP in the second quarter, the market will require a more complete picture by studying employment, consumer, industrial inflation and retail sales data in June-July. They should be published on Wednesday and Thursday.

The OPEC monthly report will appear on Friday, which is likely to disappoint again with the prospect of a slowdown in demand. Russian Energy Minister Alexander Novak warned that the cuts in production regulated by OPEC + also take into account possible decrease in consumption forecasts.

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