Forecasting the upcoming week: US inflation takes center stage next week

The US Dollar Index (DXY) slipped below the 100.00 mark following a decline in Friday's session. The US economy reported a loss of 23,000 jobs in July, falling short of expectations for an 80,000 gain. June's revision showed a 20,000 job loss, and average hourly earnings decelerated to 3.2% year-over-year. After earlier pricing a hawkish Federal Reserve (Fed), markets reversed course in the morning.

On Wednesday, the Consumer Price Index (CPI), expected at 3.4% YoY headline and 2.5% YoY core, will determine if the market revaluation continues or pauses. Two Federal Reserve speakers will speak on Thursday, with Hammack and Barkin set to address the market. The following week will test whether the USD sell-off post-July's payrolls decline will persist as investors shift focus from the labor market to prices.

The spotlight will be on Wednesday's CPI report, with other releases including Producer Price Index (PPI), Retail Sales, and the preliminary Michigan Consumer Sentiment survey. Meanwhile, the Reserve Bank of Australia (RBA) meets on Tuesday, and the UK will release its second-quarter GDP on Thursday. China will lead off on Sunday with its inflation figures, which will influence commodity-linked currencies.

The EUR/USD pair stays above the 1.1550 region, nearing two-month highs. The Eurozone's focus is on confirmations rather than surprises, with German and Italian final inflation figures on Wednesday and Spanish and French readings later in the week, alongside Eurozone Industrial Production on Thursday. Friday will see the preliminary second-quarter GDP at 0.4% on the quarter and 1% on the year, along with the initial employment change release.

The European Central Bank (ECB) has no immediate plans, keeping the Eurozone focused on these data points. GBP/USD trades near 1.3500, testing resistance once again this month. The UK now has its own set of data to release on Thursday, including second-quarter GDP, expected to slow to 0.4% from 0.6%, monthly GDP contracted by 0.1%, and Manufacturing Production expected to decline.

A weak set of numbers could complicate the Bank of England's stance and provide Cable with its first domestic drag in weeks. USD/JPY closes the week under the 158.00 level after the yen's jump on the US NFP miss, with traders still wary of intervention a week after the joint Tokyo-Washington operation. Japan's calendar is light with June Current Account figures on Sunday as the only notable release.

This leaves the pair reliant on US data and the question of whether authorities will intervene. AUD/USD trades below the 0.7100 level, its best in two months, as the Australian dollar gains strength. The RBA will announce its interest rate decision on Tuesday and is expected to hold at 4.35%, with a focus on the accompanying statement and Governor Bullock's speech on Thursday.

Chinese CPI and PPI on Sunday will be crucial, as consumer prices are projected to slow to 0.8% annually, and factory-gate inflation to 3.8%. Soft readings could reignite growth concerns that have limited the Australian dollar's rise all year. Gold ends the week above $4,300 after its strongest run since January, driven by collapsing rate-hike expectations.

A soft CPI print would confirm this move, while a firm one would necessitate reassessment, particularly given Strait of Hormuz risks and unsettled energy prices. Agustin Wazne joined FXStreet as a Junior News Editor, specializing in Commodities and covering Majors.