Consumer price inflation is expected to have reached +2.2% in the second quarter of 2017, up from a prior reading of +2.1%, according to market estimates, and at the lower end of the central bank’s +2-3% target range (y/y). The RBA’s target is defined as a medium-term average to allow for any unseen circumstances and for lags in the effects of monetary policy. Inflation is expected to be pushed higher by rising commodity prices boosting domestic income and expenditure. With inflation levels still low – Q4’16 figures (just two data periods ago) were the lowest in 19 years – interest rate hikes are still a way off, although some believe that the current 1.50% cash rate will be the low of the current economic cycle.

Pairs to Watch: AUD/JPY, AUD/NZD, AUD/USD

07/26 Wednesday | 08:30 GMT | GBP Gross Domestic Product (Q2)

The first look at Q21’7 UK GDP is expected to show the UK economy grew +1.7%, down from a prior rateof +2.0% (annualized). The quarter-on-quarter figure however is expected to show a slight pickup to +0.3% from a prior +0.2%.The mixed back may be evident of the potential effects of Brexit flowing through into official figures. The latest retail sales figures, released last week and included in Q2’17 GDP data, posted a rebound to +3% from +0.6% (y/y), which bodes well for GDP. A combination of stagnating wage growth and rising inflation had crimped consumer expenditure, until recently the prime growth driver in post-Brexit UK.

The preliminary UK GDP reading is published around 25 days after the end of the quarter and is based on 44% of actual data. The second estimate is released around seven and a half weeks after the end of the quarter and is based on around 80% of actual data. The third estimate is released 90 days after the quarter’s end and is based on around 91% of actual data.

Pairs to Watch: EUR/GBP, GBP/JPY, GBP/USD

07/26 Wednesday | 18:00 GMT | USD Federal Reserve Rate Decision

Given the steadfast support for a majority of Fed policymakers – particularly 2017 voting members – to raise rates again before the end of the year, it is possible that the Fed uses this ‘off-cycle’ meeting to begin the implementation of their balance sheet normalization strategy, which was outlined at the June meeting in the “Policy Normalization Principles and Plans” augmentation.

Amid the lackluster US data performance and slump in medium-term US inflation expectations, the odds of a Fed rate hike by the December 2017 meeting have eroded steadily. At the end of last week on July 21, the implied probability of a 25-bps rate hike was 40.4%; three-months earlier, back on April 28, it was 46.7%. The timing of the next hike, per Fed funds futures contracts, has been pointing to March 2018, although in recent days this has started to oscillate to further out on the calendar; late-Q1’18 or early-Q2’18 is now priced-in.

Should the Federal Reserve’s July policy statement reveal the beginning of the normalization process and a reaffirmation of the desire to raise rates by the end of the year, perhaps market participants will be forced to confront the divergence between what the Fed is saying it wants to do and the much more dovish interpretation that the market currently holds. If so, the US Dollar may just finally find a reprieve after its latest swing lower.

Pairs to Watch: EUR/USD, USD/JPY, DXY Index, Gold

07/27 Thursday | 23:30 GMT | JPY National Consumer Price Index (JUN)

Inflation in Japan has steadied in recent months, after spending the end of last year near deflation territory. The National Consumer Price Index is expected to show another +0.4% increase in June, the same as last month. Needless to say, such soft inflation falls well short of the Bank of Japan’s +2% medium-term target.At last week’s BOJ meeting, the central bank said that loose monetary policy would remain in place for the foreseeable future and underscored this notion by pushing back the expected timeline for when the Japanese economy would achieve +2% inflation.

Pairs to Watch: AUD/JPY, EUR/JPY, USD/JPY

07/28 Friday | 12:30 GMT | USD Gross Domestic Product (Q2)

Annualized US GDP in Q2’17 is expected to rebound from the prior quarter’s sluggish growth rate of +1.4% to +2.5%, according to a Bloomberg News survey. The data looks to continue the trend that has been first quarter weakness followed by second quarter strength, as has seemingly been the case in most years in the post-GFC world. Overall, there still seems to be a sharp divide between ‘soft’ and ‘hard’ economic data, with confidence readings surging without a commensurate gain in actual economic activity. The Atlanta Fed GDPNow forecast sees last quarter’s growth at +2.5%, in line with surveys. Evidence of a rebound in growth could instill confidence in the Fed’s projected tightening path, which would help the US Dollar.

Pairs to Watch: EUR/USD, USD/JPY, DXY Index, Gold