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U.S. retailers’ earnings will give a glimpse into how consumers are dealing with sky-high inflation, and a raft of data offer a check-up on the health of the U.K. economy.

Power problems will continue to plague Europe, while the central bank spotlight falls on New Zealand.

Here’s your week-ahead in markets:

RETAILERS ROUND OFF EARNINGS

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Shoppers at a Walmart store, in North Brunswick, New Jersey, on July 20, 2020.EDUARDO MUNOZ/Reuters

Investors will be looking out for what the biggest U.S. retailers have to say on rising prices, after a rare bit of good news on inflation in the past week.

Walmart Inc. and Target Corp., which report second-quarter earnings on Tuesday and Wednesday, respectively, have recently cut forecasts and warned inflation was squeezing margins and forcing consumers to reduce discretionary purchases.

Retailers’ outlook for consumer behavior will be key for investors looking to assess the pace of inflation. U.S. consumer prices were unchanged last month, the largest month-on-month deceleration of price increases since 1973.

Other big retailers reporting include Home Depot on Tuesday and Lowe’s the following day, while U.S. retail sales data, set for Wednesday, will give a broad picture of how the consumer is faring.

EUROPE’S SICK MAN GETS SICKER

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People walk through the financial district of Canary Wharf, London, England on Sept. 28, 2017.AFOLABI SOTUNDE/Reuters

With the Bank of England’s dire warnings still ringing in their ears, traders can expect no cheer from U.K. approaching data.

British consumer inflation figures for July due Wednesday will likely top June’s 9.4-per-cent print, heading toward a 13.3-per-cent peak forecast for October.

The BoE predicts a long and deep recession, evidence of which may come from July retail sales data out on Aug. 19. Sales slumped 5.8 per cent year-on-year in June, while consumer confidence is languishing at its lowest since 1974.

The U.K. labour market has so far been robust; almost 300,000 jobs were added in the quarter to May, leaving unemployment at just 3.8 per cent.

However, adjusted for inflation, pay excluding bonuses fell by the most since records began in 2001. Another such reading may emerge on Tuesday, just as rail workers prepare for more of the strikes that have paralyzed public transport this summer.

STILL GOING 50-50 DOWN UNDER

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A security guard stands in the main entrance to the Reserve Bank of New Zealand located in central Wellington, New Zealand, July 3, 2017.David Gray/Reuters

Tight labour markets in New Zealand and Australia are making it difficult for both the inscrutable Reserve Bank of New Zealand and the more vocal Reserve Bank of Australia to find a middle ground on rate hikes.

Investors are certain RBNZ Governor Adrian Orr is not yet ready to compromise on inflation and will raise rates by another 50 basis points on Wednesday, notwithstanding the slight easing of inflation expectations and cooling property prices.

What the RBNZ signals about wage growth could sway current expectations for a peak policy rate of 4 per cent early next year.

Second-quarter wages data in Australia are due the same day, and anecdotal signs suggest the tightest labour market in five decades also will set the RBA up for 50 bps next month, and for 225 bps of tightening in four months – a pace unseen since the 1990s.

Norway’s central bank meanwhile is expected to hike rates when it meets on Thursday. It raised rates by 50 bps in June and some economists expect big hikes in August and September.

PRAY FOR RAIN

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The river Rhine is pictured with low water in Cologne, Germany, on Aug. 10.Martin Meissner/The Associated Press

Already reeling from gas supply shortages, Europe faces soaring electricity prices and possible power cuts, as blistering summer weather sends water levels to critically low levels in rivers, lakes and reservoirs.

Along the German stretch of the Rhine, barges can only sail with partial loads of coal, threatening output at power plants . Norway, experiencing low rainfall after a winter with relatively little snow, may cap hydropower exports to preserve its reservoirs.

As a result, German baseload 2023 contract, Europe’s benchmark, has hit record highs, almost doubling since mid-June.

HOME RUN

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New residential units under construction on Aug. 4 in Los Angeles.Mario Tama/Getty Images

The cooling U.S. housing market gets a couple of gut checks in the coming week. July data on housing starts are due on Tuesday, after new U.S. home-building activity fell to a nine-month low in June.

Data on U.S. existing home sales for last month are released on Thursday after such sales fell for a fifth straight month in June to the lowest level in two years.

However, a moderation in mortgage rates could underpin support for housing, with the 30-year rate trending lower since mid-June after doubling in 2022.

The SPDR S&P homebuilders ETF has rebounded 25 per cent since mid-June after getting pummelled in the first half of the year.

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