Week Ahead: US Yields and UK Data in Focus

It’s the middle of the month so we get the usual UK data dump, including July CPI, job market figures and retail sales. News out of the UK has been relatively quiet, a welcome sign, especially politically, after the PM change. Focus will be on inflation, which is set to rise on higher energy costs after the household price cap increased by 13% in July. PMIs for August will also be released and will be scrutinised for any sign that firms are becoming more confident in passing on higher input costs.

We think the BoE will stay on hold for a prolonged period. As yet, there have few signs of any second-round effects from higher energy prices into broader inflation. Survey data is not ringing any alarm bells. There also remains a clear degree of slack in the UK labour market, with vacancies below pre-pandemic levels. Risks to the call are clearly tilted towards a degree of tightening if Middle east tensions ratchet higher, with any rate increase another headwind for activity. We are also mindful of the seasonal nature of the UK economy, which has tended to perform better in the first half of the year.  For now, bullish momentum in cable targets 1.3650.

There was likely to have been enough evidence of disinflation in last week’s US data, together with more signs of slowing in the labour market, to allow Fed Chair Warsh to keep the inflation hawks at bay on the FOMC. The July CPI figures did not point to an urgent need for policy action and September rate hike bets have now fallen to 30% from 50:50 before the CPI report and fully priced a few weeks before that. Is that and the 90% chance of a hike by year-end still too high? We continue to watch the 10-year US Treasury yield, the global barometer for borrowing costs, which remains near the key resistance level of 4.74% and contrasts with rallying equities. Something has to give at some point.

Further ahead, there is still considerable uncertainty over the message that could emerge from the next week’s Jackson Hole Fed Symposium, particularly after that inflation report leaned dovish.  Hawkish messaging from Fed officials like Hammack continues. She voted for a hike and continued to make the case for tightening last week. That said, there has been a ‘good family fight’ discussion as we know, as highlighted by another official Barkin, who raised some doubts about the need for higher rates despite not being considered a dovish voice within the FOMC. We watch to see if more centrist members start to soften their hawkish tone. That could mean the recent rangebound summer trading in the dollar finally breaks down. Support sits at 99.41 with the 200-day SMA at 99.18. The EUR/USD equivalent is above at 1.1627 which is an obvious bull target.

In Brief: Major Data Releases of the Week

Monday, 17 August 2026

China Data: Sluggish momentum is seen in July activity data. Retail Sales are expected to tick up one-tenth to 1.4% while Industrial Production and Fixed Asset Investment are forecast to modestly worsen. Policymakers continue to hold off offering new stimulus, which is putting the 2026 growth target at risk.

Tuesday, 18 August 2026

UK Jobs: Earnings are seen easing to 4% from 4.3% and ex-bonus to 2.8% from 2.9%. The unemployment rate is predicted to fall two-tenths to 4.7%. This comes from a peak of 5.2% at the start of the year, though there have been reliability issues with this data.

Wednesday, 19 August 2026

UK CPI: The headline and core prints are seen rising to 2.9% from 2.6% and 2.5% from 2.6%, respectively. The former is due to the utility price cap adjustment. The all-important services inflation is expected to ease two-tenths lower to 3.4%.

FOMC Minutes: Markets viewed this meeting as relatively dovish with September rate hike bets being pared back to 50% from 67%. There were little changes from June and no explicit forward guidance in keeping with new Chair Warsh’s distaste for it.

Thursday, 20 August 2026

Australia Jobs: The headline print is expected at 13.5k, after the strong 76.3k in June. The jobless rate is forecast unchanged at 4.4% as the participation rate ticks lower. The recent jump in underemployment could point to more slack incoming. 

Friday, 21 August 2026

Global PMIs: The Eurozone manufacturing rebound has recently offset softer services activity. Supply chain disruptions will be watched, while price gauges will be important. PMIs have generally shown less and less pressure for broad price increases following the higher energy prices.

UK Retail Sales: Expectations are for the headline to fall 0.5% m/m, lower than the prior 1%. The heatwave may take its toll, though the end of the World Cup could be a boost.