CPI Data in Focus this Week

STOCK INDEX FUTURES

Stock index futures are steady as markets brace for a week with key inflation data, a summit between President Trump and Putin, and the expiration of the US-China trade truce, which is set to end on Tuesday. Attention will also be focused on President Trump’s sectoral tariffs on semiconductors, pharmaceuticals, and other goods.

CPI inflation data on Tuesday will be the key piece of economic data for markets, with the potential to switch markets’ concerns towards the impact of tariffs on inflation. Recent US ISM services PMI data showed a significant rise in the prices paid index. The higher costs paid by companies are likely to be passed onto consumers, with data for July likely to expand on the inflationary pressures seen in the June data, although the impact will likely be most significant in the fall. Weekly jobless claims data are due Thursday, followed by retail sales for July and the University of Michigan preliminary consumer survey for August on Friday.

The Nasdaq will likely face downward pressure from a newly reached deal between Nvidia, AMD, and the US government that sees the two companies agreeing to pay the US 15% of the revenue for certain chip sales to China. Nvidia stock was off by 0.4% premarket, while AMD stock dropped 1.4% as investors digested the unusual deal in which the chipmakers will essentially pay for export licenses. While the details are still being worked out, the chips in question reportedly include Nvidia’s H20 AI chip and AMD’s MI308 chips, which previously faced export controls from the Trump administration.

CURRENCY FUTURES

The September USD index is higher ahead of the Tuesday deadline for the US and China to strike a new tariff deal. Inflation data on Tuesday could determine whether the Fed will lower borrowing costs next month. Core CPI inflation is expected to rise by 0.3% in July. Last week, the dollar weakened on growing bets the Fed will lower rates further this year amid signs of a softening labor market. Leadership changes at the Fed fueled concerns over political influence and a potential erosion of the central bank’s independence, while worries about the economic impact of President Trump’s sweeping tariffs added further pressure. The greenback was little changed against most major currencies, while it gained some ground versus the Aussie ahead of an expected rate cut from the Reserve Bank of Australia this week.

Euro futures are lower, market attention will turn to Friday’s meeting between President Trump and Putin, aimed at finding a resolution to the war in Ukraine. On the data front, the week is relatively light for the eurozone, with  final inflation figures for July being released from Italy on Monday, then from Germany and Spain on Wednesday, and from France on Thursday. Italian inflation figures match previous estimates, with prices rising 0.4% in July and 1.7% on the year. Germany’s ZEW economic sentiment index for August will be released on Tuesday and will give an indication of how much relatively high US tariffs on eurozone goods have knocked sentiment. Eurozone industrial production figures for June are due on Thursday, alongside second-estimate eurozone GDP data for the second quarter.

British pound futures are lower, as job market and growth data later in the week could take on more importance after the Bank of England’s close decision to cut rates on Thursday. Four out of nine members voted to leave rates unchanged. The vote highlighted a very tricky outlook for the economy, with inflation high as the economy weakens. The BoE forecast that annual inflation would peak at 4.0% in September causing the sterling and gilt yields to rise as investors pared back expectations for another rate reduction in November. Upcoming data, however, could shift concerns from inflation to the economic outlook. Jobs and wages data on Tuesday, followed by gross domestic product data for the second quarter and June industrial production on Thursday, will give markets a fresh look at how the UK economy is weathering.

Japanese yen futures are lower, trading in a narrow range as markets await second-quarter GDP figures Thursday evening, which are expected to show a 0.1% growth from the first quarter of 2025. Minutes from the Bank of Japan’s July meeting showed that the central bank expected growth to be moderate while also expecting underlying CPI inflation to improve slightly. While a trade deal with the US has helped reduce some uncertainty, BoJ Governor Kazuo Ueda cautiously noted that the economic impact of high tariffs remains unclear, and underlying inflation is still below the 2% target.

Australian dollar futures are lower, with markets bracing for a policy meeting from the Reserve Bank of Australia, where is it widely expected that the central bank will cut rates. Australian second-quarter CPI came in below expectations, strengthening market expectations for a rate cut. It will be a data-heavy week in Australia, with second-quarter wage growth on Wednesday and July employment figures on Thursday. While the RBA is expected to highlight strength in sectors like construction, another rise in unemployment could increase pressure on the bank to ease further.

INTEREST RATE MARKET FUTURES

Futures are higher across the curve, with Tuesday’s CPI inflation data likely to be the main driver of price direction. Core CPI inflation is expected to rise by 0.3% in July, any reading above that could give the Fed a serious consideration to continue to hold rates in an effort to battle inflation, which is expected to rise throughout the rest of the summer and into the fall. ISM services PMI data showed a significant rise in the prices paid index as a result of tariffs, which businesses are expected to pass onto consumers, extending price pressures.

Over the weekend, Fed Vice Chair for Supervision Michelle Bowman explained her dissent at the July FOMC meeting. She argued that with slowing economic growth and signs of a weakening labor market, it was appropriate to begin easing the Fed’s moderately restrictive policy toward a neutral stance, suggesting that action in July could have helped mitigate further economic and labor market deterioration. Bowman also expressed optimism about inflation trends, noting that core PCE inflation is likely closer to the Fed’s 2% target than current data reflects, with housing services inflation declining, other core services inflation already aligned with the target, and only core goods inflation remaining elevated—likely due to limited tariff passthrough.

The spread between the two- and 10-year yields is 50.6 bps.

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