CPI, China GDP, and BOC Meeting Set the Week's Tone

The US dollar finished last week mixed. The New Zealand dollar led the G10 currencies after strong data and the Reserve Bank's hawkish rate hike. The Norwegian krone followed close behind, helped by a roughly 4.5% rally in Brent crude, the first weekly gain in five weeks. The Swiss franc and Japanese yen fell. The dollar rose against the franc for the fifth week in six. The yen pared losses late in the week after Japan's finance minister urged pension funds to boost domestic allocation. The impact was short-lived.

This week brings a trio of key events. The US June CPI report is expected to show headline inflation slowed to 3.8% from 4.2%, with the core rate easing to 2.8% from 2.9%. Federal Reserve Chair Warsh delivers his semiannual testimony before Congress on Tuesday and Wednesday. The market sees little chance of a hike this month; October looks more likely. The Atlanta Fed's GDPNow tracker for Q2 has fallen to 1.3% from above 3% at the end of May. Retail sales and industrial production are also due. The data are unlikely to be decisive for the near-term policy path.

China's Q2 GDP is expected to show growth slowed from the 5% year-over-year pace in Q1. The quarter ended on a soft note. June retail sales may have recovered after a 0.6% contraction in May. House prices likely continued to decline. The campaign against