Newsquawk Week Ahead in Focus 24-28th August 2026

JAPANESE GDP REVIEW: Japanese Q2 GDP grew at an annualised 1.1%, below expectations of 2.0%, although the economy expanded for a third consecutive quarter. Domestic demand was subdued amid elevated inflation and weaker consumption and investment, while resilient exports, including AI-related semiconductor equipment, provided support. Analysts generally viewed the miss as a complication rather than a barrier for the BoJ, with the economy remaining sufficiently resilient and inflation elevated enough to keep further tightening in play, including a potential September hike.

CHINESE ACTIVITY DATA REVIEW: Chinese activity data disappointed across the board in July, with Industrial Production rising 4.5% Y/Y (exp. 4.8%, prev. 5.3%), Retail Sales increasing just 0.6% (exp. 1.5%, prev. 1.0%) and Fixed Asset Investment contracting 6.7% (exp. -6.2%). Property investment fell 19.2%, while unemployment rose to 5.2%. The data reinforced concerns over weakening domestic demand and China’s continued reliance on exports for growth, increasing pressure on Beijing to provide further monetary and fiscal support.

CANADIAN INFLATION REVIEW Inflation came in slightly hotter than expected in July. Headline rose 3.0% Y/Y (exp. 2.9%, prev. 2.8%) and 0.5% M/M (exp. 0.4%, prev. -0.4%), while core Y/Y rose 2.3%, accelerating from June’s 2.1%. The three watched metrics, Common, Median and Trimmed mean, were above expectations on a Y/Y basis, lifting the BoC average to 2.2% (prev. 2.1%). Gasoline prices were the largest upward mover, rising 25.7% Y/Y in July (June: +20.5%) amid Middle East supply disruptions. Travel tours (+15.2%) and air transportation (+12.0%) also accelerated, while grocery inflation slowed to +3.1% (June: +3.9%) but remained above headline CPI for an 18th consecutive month. Oxford Economics notes that excess slack in the economy and a further deceleration in shelter inflation will likely keep core inflation near the BoC’s 2% target this year, allowing the BoC to stay on the sidelines.

UK JOBS REVIEW: Overall, the series doesn’t show a significant change in the labour market, a point that was expected heading into the release. Initial focus on the hotter-than-expected headline wage metrics, including the upward revision to the measure with bonuses. Within this, it is worth highlighting the split between public and private pay, with the public sector still well ahead at 6.1% vs 2.8% for the private sector, the latter was a marginal dovish surprise. Additionally, the claimant count unexpectedly declined and the prior was revised down. However, this is offset by the unemployment rate unexpectedly remaining at the prior 4.9% level (exp. 4.8%) and the 3M employment change printing below the prior. A dynamic also seen in the reaction, with GBP initially lifting before paring and moving below pre-release levels, action also somewhat explained by the private pay component and weak payrolls for both the current and prior, revised, series. For the BoE, the data keeps the extended hold narrative in play, and arguably factors in favour of the dovish side of the MPC.

UK INFLATION REVIEW As expected, the headline ticked up to 2.9% Y/Y (prev. 2.6%) and above the BoE’s 2.8% view, while the core remained at 2.6% Y/Y, defying consensus for a moderation to 2.5%. In short, the data does not change the extended hold narrative for the BoE, as the upside was driven by the Ofgem price cap adjustment, a point that overshadowed the drop in crude and petroleum prices in the period, alongside a marked moderation in food. Elsewhere, the Services measure moderated to 3.4% Y/Y (prev. 3.6%), a welcome point for the BoE, but not to a degree that changes the narrative, particularly as this was skewed by the airfares component. Policymakers will continue to look to survey data and upcoming hard data points for insight into any signs of second round effects. Ahead, we look to see how the unwinding of the airfare, VAT and removal of the Ofgem influence net-out in the August series and by extension frame the backdrop into September’s BoE.

FOMC MINUTES REVIEW The FOMC Minutes were largely as expected, as they noted that most participants at the July confab supported keeping interest rates unchanged, while several favoured an increase, as we know due to the three hawkish dissenters and following commentary. Within those dissenters, a few participants judged doing so would likely help forestall the need for further hikes. Most participants assessed higher rates would likely be necessary if inflation did not fall, but that is a pretty consensus view given recent rhetoric and the importance the Committee has stressed of getting inflation back to target. Almost all FOMC members agreed it was appropriate to retain the policy statement affirming FOMC ‘will deliver price stability’, but no caveat was issued into what the others saw or the reasoning. Fed staff economic outlook showed the inflation outlook was like the one prepared for the June meeting, but the economic outlook was ‘a touch weaker’. On the meeting schedule, Chairman Warsh said six scheduled meetings per year, held roughly every two months, would allow more information to accumulate between meetings, but no decision was made and Warsh indicated no change to the 2026 schedule. All in all, the latest Minutes were dwarfed by recent data, which has no doubt been dovish and shifted money market pricing to favour a hold instead of a hike. One of the unknowns remains the US/Iran war. Nonetheless, Pantheon Macroeconomics notes, as things stand, it is unlikely any other FOMC members will be joining the three hawks, and they continue to think that a majority of members will vote to keep policy unchanged through the fall and winter, as the labour market stays weak and domestically generated inflation continues to cool.

RIKSBANK REVIEW: The Riksbank maintained its policy rate at 1.75%, as expected, while the accompanying commentary largely reiterated the prior meeting, when policymakers assessed that the possibility of a rate increase later this year remained. The Bank said that if inflation continued to rise beyond the summer months, it would begin to tighten monetary policy. However, the release also contained some dovish elements, which spurred some pressure in the SEK at the time. Riksbank acknowledged the recent rebound in domestic GDP, though said that “overall, the outlook for the economy remains largely unchanged”. Adding to these concerns, the Bank said that “labour market developments have been somewhat weaker than expected”. Overall, the Bank left the door open to further tightening this year, with policymakers focused on the uncertainty and risks surrounding inflation. Following the meeting, SEB and Nordea both reiterated their calls for rates to remain steady for the remainder of the year, but highlighted the elevated uncertainty. Markets will await the Riksbank Minutes next Wednesday for further clues on how policymakers view the inflation outlook. PBOC LPR REVIEW: The PBoC maintained its 1yr LPR at 3.00% and 5yr LPR at 3.50%, as expected, despite the recent deterioration in Chinese activity data. Policymakers remain constrained by already-low commercial bank margins and continue to favour fiscal support over aggressive monetary easing. Nonetheless, recent economic weakness has maintained expectations for further policy support, with some analysts looking for a rate cut later in Q3.

JAPANESE TRADE BALANCE REVIEW: Japan recorded a JPY 634.5bln trade deficit in July (exp. JPY 680bln deficit, prev. JPY 409.9bln deficit), marking a third consecutive monthly deficit. Exports surged 23.2% Y/Y (exp. 19.9%), supported by strong semiconductor and technology-related shipments, while imports rose 27.8% amid elevated energy costs. Overall, robust external demand provided an encouraging signal for the Japanese economy despite the wider deficit and continued pressure from higher import costs.

AUSTRALIAN JOBS REPORT REVIEW: Australian employment unexpectedly fell by 15.8k in July (exp. +11.7k, prev. +76.3k), while the Unemployment Rate rose to 4.5% (exp. 4.4%, prev. 4.4%) and the Participation Rate eased to 66.9% (prev. 67.0%). The decline was driven by a 32.2k fall in part-time employment, while full-time employment rose 16.3k. Overall, the report pointed to a gradual cooling in the labour market and reinforced expectations for the RBA to remain on hold, although resilience in full-time employment tempered the weakness in the headline print.

JAPANESE CPI REVIEW: Japanese CPI accelerated in July, with headline inflation rising to 1.9% Y/Y (prev. 1.6%), Core CPI at 1.8% (exp. 1.8%, prev. 1.6%) and Core-Core CPI at 1.9%. Higher energy and import costs contributed to the acceleration, while services inflation also edged higher amid continued wage pass-through. The data reinforced expectations for further BoJ normalisation, with some analysts seeing scope for the next rate hike as soon as September.

UK RETAIL SALES REVIEW: A larger-than-expected moderation in retail activity as the initial summer strength faded, amid the end of the World Cup, heatwave impacting in-person activity and ongoing supply shortages. However, the narrative of a robust retail backdrop remains, though it remains to be seen if this is a ‘Burnham Bounce’ or something more substantial. For the BoE, the data does not change the narrative.

EZ FLASH PMI REVIEW: The EZ-wide release was stronger than expected, and saw the Manufacturing and Composite lift further into expansionary territory while Services remained at the prior level. Internal commentary pointed to encouraging signs of rising AI-related demand and defence-related spending, alongside increasing tourism boosting regional activity. Alongside this, elevated prices continue to impact demand, but pressures do show signs of easing. Overall, the data keeps the ECB positioned towards a September hike, as the economy is robust enough to absorb the tightening required to deal with stubborn price pressure. Albeit, economic conditions are not necessarily indicative of a unanimous decision, at this stage at least. Note, the regional breakdown saw further pressure in German Services, which unexpectedly slipped deeper into contractionary territory, though the commentary is indicative of an improvement ahead. For France, where Services were also weak, the recent extreme heat seemingly factored alongside an uptick in associated price pressures.

UK FLASH PMI REVIEW: Stronger than expected for Services and Composite, though the level of Manufacturing expansion moderated in-line with consensus. Data that sparked modest Gilt pressure and limited GBP strength. Internal commentary from S&P outlined that businesses are feeling the most confident since the Middle East conflict commenced, and job losses are seeing a moderation. Overall, the series is indicative of 0.3% GDP growth in Q3, vs 0.4% in Q2. For the BoE, the data keeps the extended hold narrative alive, while the price component uptick also keeps the modest hawkish skew intact, despite the dovish impulses dominating at the last BoE.