5 key market themes to watch this week

Japan’s currency remains under pressure near four-decade lows, raising concerns over higher fuel-import costs amid the energy shock. A rare joint U.S.-Japan intervention, along with U.S. Treasury Secretary Scott Bessent’s reported focus on yen purchases, has helped support the currency. However, traders are watching for signs that the Bank of Japan could raise rates in September. The use of euros instead of dollars in the intervention has also raised questions about Treasury market stability and the dollar’s reserve-currency role. (Source: Reuters)

Investors are watching negotiations between Iran and Oman for a possible interim arrangement aimed at ensuring safe passage through the Strait of Hormuz. The talks do not yet involve U.S. participation or approval, while expectations for a lasting agreement remain limited after months of conflict. With U.S. gasoline prices above $4 a gallon and inflation still a concern, any progress could offer some relief to markets ahead of the U.S. midterm elections.

U.S. consumer price data due Wednesday will be a key test for markets as expectations grow that the Federal Reserve could raise interest rates in September. Reuters-polled economists expect July CPI inflation at 3.4% year-on-year, while core CPI is forecast at 2.5%. Producer price data due Thursday and retail sales figures on August 14 will provide further clues on inflation and consumer strength. Markets are currently pricing roughly even odds of a September Fed hike.

Central banks in Australia and Norway are expected to keep interest rates unchanged this week as policymakers assess whether previous tightening has sufficiently cooled inflation. The Reserve Bank of Australia meets Tuesday after delivering three rate hikes this year. Softer consumer inflation has reduced pressure for another immediate increase, although officials are expected to retain a hawkish tone. Norges Bank is also expected to hold rates Thursday after Norway’s core inflation slowed in June.

Britain’s latest GDP figures on Thursday will offer an early economic test for new Prime Minister Andy Burnham. Monthly growth could receive a boost from stronger June retail sales, warmer weather and spending linked to the soccer World Cup. Lower energy prices may also have provided support. However, quarterly growth could be weaker after momentum slowed sharply in April and May. Updated euro zone GDP figures are also due Thursday, following stronger-than-expected preliminary second-quarter growth.