FUNDAMENTAL REVIEW FOR THE WEEK (12 - 16 August 2024)

The coming week is expected to be another tense geopolitical situation with a possible attack by Iran on Israel, which could happen on August 12-13. The US has tried to prevent a direct conflict, but so far without much success. The ceasefire talks scheduled for August 15 at the initiative of America are still hanging in the air. If the conflict moves into a real phase of confrontation, capital will again rush to the defensive dollar, which could seriously hit the "risks" - stocks, crypto, etc.

The second factor influencing investor sentiment is political. The election race in the US is gaining momentum. At the moment, Kamala Harris is leading in the polls, despite criticism from Donald Trump. Biden is rumored to be losing economic advisers, and this could affect economic reports. They could potentially be "cleaned" of the excessive "optimism" of the current presidential administration. Biden also hinted at possible problems (protests by Trump supporters) with the transfer of power if Harris wins.

Economic reports this week will be key for the markets, especially US inflation data (PPI and CPI), which could adjust expectations for Fed rates. The first to be released is the producer price inflation report - PPI. The extreme indicators were on the rise due to supply chain problems in the Red Sea and due to rising energy prices.

Manufacturing inflation will give an initial reaction, but the main one is US CPI inflation on Wednesday, this report will provide an understanding of the pace of FOMC rate cuts. The economic calendar now expects a moderate increase in US core and CPI inflation by 0.2% mm (the low base of 2023 is having an effect), but for the reaction of both investors and the Fed, the growth by month, the breakdown of inflation growth by sector, and rounding will be important. So far, the figures according to the forecast are on the side of the greenback, but it is important to wait for the "output" figures.

In addition, data on the UK and US labour market, inflation, GDP and retail sales are expected, which will affect the three currency majors. Data from China on Thursday is important for risk appetite and can directly affect commodity prices.