This week served up a veritable feast of volatility for financial markets. The week kicked off with a sharp decline in indices, driven by mounting recession fears. However, subsequent data releases painted a less pessimistic picture, suggesting that a recession may not be the base-case scenario. Consequently, market sentiment improved markedly towards the end of the week. The next week will see the release of another batch of crucial economic data, most notably US inflation figures. While these data are unlikely to significantly alter the Federal Reserve's outlook, they could have a profound impact on the markets. Investors should pay close attention to EURUSD, US500, and OIL.
EURUSD
The EURUSD pair reached its highest level since the beginning of the year in early August, spurred by weak US non-farm payroll data. However, the pair subsequently dipped below the 1.0950 level following the release of jobless claims data, which indicated a better shape of labor market. Next week, investors will be scrutinizing US producer price index (PPI) data (Tuesday at 01:30 pm BST), consumer price index (CPI) data (Wednesday at 01:30 pm BST), retail sales (Thursday at 01:30 pm BST), and industrial production figures (Thursday at 02:15 pm BST). Additionally, several final readings from Eurozone economies will be released, although these are expected to have a less pronounced impact on volatility.
US500
US economic data holds significant sway over the Federal Reserve, which is poised to implement its first interest rate cut in September. Should economic data disappoint, it could exacerbate concerns about the health of the economy and deepen recent declines in indices. Moreover, earnings season is still in full swing. Next week will see the release of earnings reports from companies such as Home Depot (Tuesday), Cisco (Wednesday), and Walmart (Thursday). While this earnings season has been marked by a series of negative surprises, retail companies will provide insights into the strength of consumer spending and whether the US economy is on track for a soft landing or if more aggressive interest rate cuts will be required.
OIL
Crude oil prices came under pressure in the middle of last week amid concerns about the state of the global economy, including China. OPEC+ also decided earlier this month to maintain its policy of increasing production in the fourth quarter of the year. On Wednesday at 03:30 pm BST, the latest US crude oil inventory data will be released, which could invigorate the market. On Monday, China will release new loan data, while Thursday will see the release of industrial production, retail sales, and fixed asset investment data for July.
