Thomas Watts, Investment Analyst, abrdn Portfolio Solutions, comments on the economic data releases this week.

He said: “Having seen both the European Central Bank (ECB) and Bank of Canada (BoC) cut interest rates last week, investor’s attention will now switch to both the US and UK, as the coming week presents us with several markers as to where the two economies are in terms of requiring a rate adjustment. 

“With the UK labour market having proven remarkably resilient in the face of rising rates, Tuesday will give us the opportunity to check one facet of the employment landscape for weakness, the Unemployment Claimant Count. Measuring the change in the number of people claiming unemployment related benefits during the previous month, the figures are crucial in understanding the strength of the overall market as the figures contribute strongly to the unemployment picture.

“A more comprehensive picture should be painted for the broader domestic economy the following day as the Office for National Statistics releases its Gross Domestic Product (GDP) figures. GDP is often considered the broadest measurement of the health of an economy, gauging the change in the total value of all goods and services produced by a country. With the UK having just exited a shallow recession with economic growth having re-entered positive territory, many will be hoping that the trend can continue. The data also takes on added significance as it acts as one of the final pieces of big economic data before the upcoming general election and will be sure to influence voter thinking when heading to the polls. 

“All eyes will be on the US during the middle of the week for the nation’s inflation figures, a piece of data that could well set the tone for the coming months. With financial markets predicting that a US rate cut in September stands on a knife edge, pricing in around a 50/50 chance the US Federal Reserve will make its move that month, next week’s CPI data could prove crucial in shaping the thoughts of its rate setters. For the record, the Fed is set to announce it base rate for this month shortly after the data is released but with markets not even pricing in the slightest chance of a rate cut, investors will be keen to analyse the central bank’s forward guidance.

“The theme of central bank press conference and rate setting caries on throughout the second half of the week as the Bank of Japan (BoJ), also give their views on the world’s third largest economy. Although the BoJ is widely expected to raise rates further in the coming months, there is a broad consensus that this will be a slow process and we should not expect the bank to rush. With this in mind, investors could take a wait and see approach, scrutinising the accompanying press conference for any hints of future rate policy from the bank themselves.” 

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