UK Inflation Back in Focus Amid Rising Food Prices and Geopolitical Uncertainty

Global markets are entering a relatively quiet phase during the summer months, but investors still face several potential market-moving risks. One of the key factors to watch is food inflation, which has been rising due to strong El Niño conditions, higher energy costs, fertiliser shortages, and disruptions to grain shipments from Ukraine. This could have a significant impact on Asia and Latin America.

The upcoming week will see a busy schedule of retail earnings in the US, with companies such as Walmart, Home Depot, Target, Lowe's, and Deere set to release their quarterly results. Investors will be closely watching these reports for signs that higher fuel costs are shifting consumer spending towards essentials, while borrowing costs may continue to weigh on home-improvement demand.

Another key market mover is Japan, where the latest GDP data is expected to show continued growth despite higher energy costs and geopolitical uncertainty. With inflation pressures building and the yen under pressure, markets are increasingly expecting the Bank of Japan to raise its policy rate by 25 basis points to 1.25%.

The price of gold has rebounded strongly from its June lows after suffering a sharp correction earlier in the year. Expectations that the Federal Reserve may avoid further rate hikes have helped revive investor interest, with gold ETFs beginning to attract inflows again and central banks continuing to buy gold at a record pace.

Finally, UK inflation will be back in focus after stronger-than-expected June GDP data. Inflation eased to 2.6% in June, but renewed energy-price pressures could push the July reading higher, while concerns over food prices are also growing due to extreme heat affecting agricultural production.