Markets Weekly Outlook - US Inflation, EU/UK GDP and RBA Meeting to Shape Market Moves

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Week in review - Solid Week for Global Equities

It was a quiet week for economic updates, giving analysts time to review last week's data, which clearly showed demand slowing down. While labor productivity remains strong, slower activity and rising service sector prices suggest mild stagflation.

We had a host of Central Bank meetings this week where the U.K., India, and Mexico took cautious actions. The Bank of England and Mexico's Banxico cut rates, while India’s central bank kept rates steady due to currency concerns. Switzerland had an unexpected rise in inflation, and Mexico’s core inflation stayed high despite overall easing. In New Zealand, weak job data points to a likely rate cut.

The Bank of England (BoE) meeting was the one that caught the attention of market participants. The BoE cut rates by 25 basis points to 4%, but their statement suggests the rate cuts may soon stop. Policymakers are concerned about stubbornly high inflation, which remains well above their target.

The Bank's statement noted that monetary policy is less restrictive as rates are cut. Markets see this as a signal, now expecting fewer cuts with just two by next summer and none this year.

Source: LSEG

Despite these developments global equity markets continued their impressive run. In the US dip buyers returned Monday, boosted by hopes of Fed action in September and a Trump ally joining the board, signaling a dovish shift. Despite inflation concerns, strong earnings kept investors confident in Wall Street.

In Europe, shares had their best week in 12 weeks, driven by banking stocks and hopes for a Russia-Ukraine ceasefire. The STOXX 600 rose 0.2% Friday, up 2.2% for the week. Eurozone banks gained 1.9% Friday, leading year-to-date with a 56.8% rise.

Of the 198 companies in the STOXX 600 that reported earnings through Tuesday, 53% exceeded analysts' estimates, according to data compiled by LSEG.

The dollar strengthened on Friday but is set for a weekly drop after July's jobs report showed weaker-than-expected hiring and sharp downward revisions to previous months' gains.

Oil prices dipped Friday, heading for their biggest weekly drop since June due to US-Russia deal reports and a weaker economic outlook. Brent crude fell to $66.36, and WTI dropped to $63.67.

US gold futures hit a record high Friday amid uncertainty over U.S. tariffs on common gold bar sizes. Spot gold stayed steady at $3,399.91 per ounce, up 1% for the week. Analysts await clarity, noting tariffs could heavily impact Switzerland, a key gold refining hub.

For updates on Cryptocurrencies please read:

1. Bitcoin (BTC/USD) Eyes Bull Flag Breakout as Trump Allows Bitcoin and Crypto in 401(k)s
2. Ethereum breaks 4,000 and marks new highs to the current cycle – Crypto News

The Week Ahead

The week ahead has several important data releases lined up. The US and UK will release inflation data and GDP data and from Asia we have a few high impact data releases

Asia Pacific Markets - RBA Meeting, Japan GDP and Chinese Inflation

The Reserve Bank of Australia (RBA) is expected to cut the cash rate by 25 basis points to 3.6% at Tuesday's meeting, following weaker-than-expected growth and inflation data.

Last month, the RBA surprised markets by keeping the rate at 3.85%, seeking more proof that inflation was easing toward its 2.5% target. Since then, softer Q2 inflation and June jobs data suggest the RBA may now opt for a rate cut.

China will release its July inflation data on Saturday, with consumer prices expected to dip into deflation at -0.1% year-on-year due to ongoing pressures. Efforts to curb price competition are unlikely to show immediate results.

Economic data for July, out Friday, may highlight slowing activity. Housing prices have fallen faster in recent months, and without new policies, this trend could continue. Industrial production, which beat expectations in June, is expected to slow to 6.2% YoY. Retail sales, boosted by trade-in policies, may ease to 4.6% YoY as policy effects fade. Fixed asset investment remains weak, with private investment held back by uncertainty, likely growing just 2.8% YoY.

Japan's second-quarter GDP, out Friday, is expected to show modest growth of 0.1% after a 0.04% contraction in Q1. Weak exports and inventory changes may weigh on growth, but a rebound in services and private consumption should support a slight recovery. The data could influence chances of an October rate hike by the Bank of Japan.

Europe, UK and the US Focus on Inflation and GDP Data

From the US inflation data due on Tuesday will be the focus. In June, core goods prices (excluding autos) rose 0.6% MoM, the largest jump since February 2022. For July, we expect a similar increase, with autos also likely driving inflation higher. Vehicle prices, which surprisingly fell in June despite tariff pressures, and rising car auction prices add upside risk. We forecast a 0.4% MoM rise in core CPI, above the 0.3% consensus.

The Fed is unlikely to face a repeat of 2021/22's supply shock-driven 9% inflation. Key factors like oil prices, housing rents, and wage growth, which fueled inflation then, are now cooling and should help offset tariff effects in the coming months.

On Friday we will get retail sales and consumer confidence data. Strong auto sales may boost retail figures, but weak consumer confidence, driven by tariff concerns, job market worries, and household wealth volatility, suggests slower activity in the second half of the year.

Read More: Silver (XAG/USD) Technical Outlook: Mixed Signals as Rate Cut Expectations Grow

In the UK we have jobs data due on Tuesday which will be key given the BoE decision this week as well as the upgraded forecasts.

The BoE remained calm about the job market in August, even as payrolls have steadily declined. Another sharp drop in hiring is possible, though these figures are often revised upward later. GDP data will follow on Thursday where Q1 saw a boost from export surges ahead of US tariffs, but Q2 has been weaker. Still, overall activity likely grew modestly in the spring.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Week - US Dollar Index (DXY)

This week's Chart of the week is the US Dollar Index (DXY).

The DXY rally which faded last week Friday, rejected the long-term descending trendline which has been in play since the start of 2025.

There appears to be significant concerns around the US Dollar for now and the fact that the DXY rejection occurred at the 100.00 confluence level is a big deal in my opinion.

The big cuts to U.S. job numbers have definitely challenged the Fed's claim of a 'solid' labor market. This gives the Fed more confidence that the summer inflation rise will be temporary, likely leading to rate cuts in September.

This leaves the US Dollar vulnerable to further downside moving forward with sellers likely to flood in on any short-term rallies higher. We saw a bit of that this week already with Monday and Tuesday seeing attempts at a rally being met by significant selling pressure.

On the RSI period-14 the DXY flirts with the neutral 50 level, with a move lower showing that momentum is indeed with the bears.

For now any rally higher will need to gain acceptance above the descending trendline and the 100.00 confluence level. If this happens and we see some change in the fundamentals around the US Dollar then perhaps i would change my stance. Right now, such a move seems unlikely.

US Dollar Index (DXY) Daily Chart - August 8, 2025

Source: TradingView.Com (click to enlarge)

Key Levels to Consider:

Support

• 97.70
• 96.90
• 96.37 (YTD Low)

Resistance

• 98.56
• 99.56
• 100.00 (confluence level)

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

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