The UK inflation report showing dropping inflation figures as the summer started made the financial news headlines with the odds for a 50 basis points rate hike by the BoE in August falling to 42% from 59% earlier in the week.

Japan’s National CPI report and the UK retail sales survey will be among the most important data releases for the rest of the week.
 

UK Inflation Softens in June

The UK CPI inflation report released earlier in the morning surprised economists as the headline inflation figure came in at 7.9% on an annualized basis in June, lower than the anticipated 8.2% reading. The survey by the Office for National Statistics (ONS) showed that inflation rose by 0.1% on a month-to-month basis, once again lower than the 0.4% expected by market analysts. Economists at ONS said that the dropping cost of fuel drove inflation figures down. Sterling fell by 0.6% against the US dollar right after the report’s publication.
 

New Zealand Inflation Drops in Q2 2023

According to a report by Statistics New Zealand, inflation in the second quarter of the year came in at 6.0% on an annualized basis, while economists had expected a 5.9% figure. However, headline inflation was significantly lower than the 6.7% figure recorded in the first quarter of 2023. Commenting on the report, analysts at ANZ bank said that “we maintain our forecast that the RBNZ is not in fact done hiking yet, with a 25bp hike penciled in for November.”
 

Japan National CPI June 2023

On Thursday evening, the Japanese Statistics Bureau will release the June National CPI report. Economists expect the National CPI inflation to come in at 3.5% on a year-to-year basis, 0.3% higher than May’s reading.

The BoJ’s head Kazuo Ueda said that the Bank of Japan has been patiently maintaining an easing monetary policy. Ueda suggested that “unless our assumption on the need to sustainably achieve 2% target changes, our narrative on monetary policy won't change.” The BoJ’s governor comments didn’t signal any upcoming change in the Yield Curve Control (YCC), forcing the Japanese yen to drop.
 

UK Retail Sales June 2023 Report

The Office for National Statistics (ONS) will publish the June UK retail sales report on Friday. Market analysts suggest that retail sales increased by 0.2% on a month-to-month basis, a bit lower than May’s figure. On an annualized basis, analysts expect retail sales to have dropped by 1.5%. Retail sales are usually a reliable indicator of how consumers react to a central bank’s monetary policy changes such as the ones implemented by the Bank of England (BoE).

According to the BRC-KPMG Retail Sales Monitor, total retail sales rose by 4.9% on an annualized basis. Commenting on the British Retail Consortium (BRC) report published on July 12, analysts said that “apart from a blip in May, retail sales growth has remained steady at around 5 percent every month in the first half of this year.  However, the growth comes against a background of much higher inflation levels, resulting in reduced margins and profitability for operators across the sector.”

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