Following a busy start to the first week of July, economic data from most of the developed economies take a back seat. Inflation will remain the key theme this week as the US will be reporting on the June consumer price index data. The Fed Chair, Janet Yellen will also be giving her semi-annual testimony to the Congress.

In Canada, the markets are expecting a rate hike from the BoC this week, following the hawkish comments from the central bank officials. In the UK, the monthly jobs report will show whether wages are catching up with inflation or if there is further weakness in the pace of wage growth. Here is a brief list of events to watch out for this week.

Janet Yellen testimony and US inflation report

A somewhat slow week from the US jumps on top of next week’s events with the Fed Chair Janet Yellen set to testify to the Congress on the semi-annual monetary policy testimony.

Past events have shown that Ms. Yellen does not deviate from the main theme and therefore, any dovish remarks are at minimal risk. The Fed chair is, of course, likely to talk about the inflation outlook and more importantly the balance sheet reduction as well as the interest rate normalization.

As such, the overall view from Ms. Yellen could be one that is hawkish for the markets. This should potentially support the US dollar in the near term.

Besides Ms. Yellen’s testimony, the other main event of the week will be the monthly inflation report. The June CPI data comes after nearly three consecutive weak inflation readings. Therefore, the June CPI data will be closely scrutinized to see if it will support the Fed’s view towards continuing its policy and balance sheet normalization.

In May, the headline consumer price index fell to 1.7%. This was after CPI hit 2.3% in January. On a month over month basis, inflation is expected to rise 0.2%, which will keep the year over year inflation rate at 1.7%, which could be viewed as stable.

UK Jobs Report – Wages expected to slow

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