All eyes on the US this week, major developments afoot
The previous week was quite a rollercoaster ride, especially for the dollar and the stock markets.
In the first half of the week, it looked as if the dollar was enjoying a renaissance, as two weeks ago US President Donald Trump announced that he would not fire the Fed chairman, and uncertainty surrounding the trade war had greatly diminished.
Agreements have been reached with several countries: the US will impose a 15% tariff on EU products, while the EU will impose a 0% tariff in return, but has promised more than $1 trillion in US energy spending and investment, which it is unlikely to be able to deliver. What can we say? There are critical voices regarding the deal.
This was the moment when European stock markets began to lose patience.
At that point, US stock markets were still doing well despite low volatility, as investors saw the possibility of an interest rate cut in September at the US Federal Reserve's interest rate meeting on Wednesday, while investors reacted well to the corporate reports released that day. Then Friday came and everything changed. It turned out that the US labor market was slowing down, while investors had renewed concerns about central bank independence. US stock indices also gave in, with the Nasdaq 100 falling more than 2% over two days.
In such an international situation, it is no wonder that the forint also had a busy week.
The Hungarian currency weakened by 4% against the dollar in three days, then strengthened by 2% in two days.
On the domestic front, one of the major events of the week was the second quarter GDP data, which came as a slight positive surprise, but analysts say the structural problems of the economy remain unchanged. Growth was driven primarily by services and consumption, while industry, agriculture, and investment continue to struggle. Meanwhile, the Ministry of National Economy (NGM) has significantly lowered its growth expectations for this year, with the new 2025 growth forecast now at 1% instead of the previous 2.5%. Minister Márton Nagy also hinted that the government is working on new tax reduction solutions.
Overall, the forint weakened by 0.5% against the euro, but investors are not in an easy position.
Bad news is coming from the US, the eurozone cannot be proud of itself, and we cannot be proud of Hungarian growth either.
What are we watching out for this week?
Monday promises to be a relatively quiet day in terms of data, with only US factory orders due.
Then, on Tuesday, the week will get underway with the release of the service sector and composite purchasing managers' index in the early hours of the morning, at a time when several data and surveys indicate that the Chinese economy has begun to deteriorate. This will be followed by Spanish and French industrial production figures, but investors will mainly be focusing on the US ISM services sector PMI, as last Friday's labor market data could lead to a complete reassessment of the US economic and investment outlook.
Hungarian data will also be released on Wednesday, as the Hungarian Central Statistical Office (KSH) will publish industrial production and retail data at a time when everyone is speculating about how much the US economy might slow down. Retail sales figures from the eurozone will also be released on the same day.
On Thursday, international data will once again be in the spotlight. The US will release new jobless claims figures and productivity growth data. The latter could also be very important in terms of inflation.
No world-shaking data is expected from abroad on Friday, but in Hungary, the inflation rate for July will be announced, and the Ministry for National Economy will also publish the preliminary government budget balance.
On Saturday, Chinese inflation data may shed light on how deflationary risks are developing in the world's second-largest economy.
Cover photo (for illustration purposes only): Getty Images
