It will be a light week in terms of scheduled economic events for the FX market. On Monday, the U.S. will release factory orders m/m and on Tuesday attention will be on the U.K.’s Monetary Policy Report hearings and the U.S. Conference Board consumer confidence and the Richmond Fed manufacturing figures.
Wednesday will bring inflation data from Australia while Thursday the focus will be the U.S. unemployment claims. Finally, on Friday, Japan will publish Tokyo core CPI y/y, Canada will release GDP m/m, and the U.S. will get the PPI m/m.
Throughout the week, several FOMC members are also expected to deliver remarks.
In the U.S., the consensus for Conference Board consumer confidence is 87.6, up from 84.5 previously. In the last print, the confidence fell to a post-pandemic low, driven by softer labor market signals, elevated living costs and heightened geopolitical uncertainty.
The most significant factor, however, was a deterioration in job perceptions. While this shift does not point to an outright pullback in spending, it suggests that consumers are becoming more cautious, especially lower-income households, Wells Fargo analysts said.
A modest improvement is likely for this week’s release, supported by a better-than-expected jobs report and softer inflation readings. However, concerns about tariffs, global political risks and affordability pressures remain unresolved and will impact household sentiment in the near term.
In Australia, the consensus is for CPI y/y to ease from 3.8% to 3.7%. With trimmed mean CPI expected to hold at 3.3%, in line with consensus, a modest upside surprise is unlikely to materially shift the near-term RBA outlook.
January is typically a softer month for prices. While headline inflation is expected to see only a monthly rise, seasonal adjustments suggest a firmer underlying pace. Even so, the annual rate is likely to edge lower, reflecting a slower start to the year compared with last January.
Food prices are expected to remain a key source of pressure, driven by seasonal increases in fresh produce and non-alcoholic beverages. Health costs should also contribute to inflation, but electricity prices are likely to be the main driver, as the impact of cost-of-living rebates will fade and prices will revert to older levels. These pressures are expected to be partly offset by price declines for holiday travel and accommodation, fuel, clothing and communications, according to Westpac analysts.
The market expects a rate hike in May, taking the cash rate to 4.10%, though risks appear skewed to the downside. Inflation pressures are increasingly concentrated in regulated and policy-driven components rather than market-based pricing, which limits the need for further action from the RBA.
This week everyone will also pay close attention to the Tokyo CPI for February as it can give us clues about Japan’s nationwide inflation trends. The consensus is for the y/y core CPI figure to drop from 2.0% to 1.7%.
Underlying inflation is still above the BoJ’s desired target, but the softer momentum suggests there isn’t an urgent need to hike rates so the Bank might wait for clear evidence of sustained price pressures. The upcoming Shunto wage negotiations and the April CPI data will be key indicators for the policy outlook.
In Canada, the consensus for GDP m/m is 0.1% versus 0.0% previously. GDP growth appears to have stalled in Q4 with output expected to be flat following a strong Q3.
Much of the weakness stemmed from temporary disruptions in October and November, while December data suggest some stabilization, supported by a rebound in manufacturing and wholesale activity as auto production recovered, according to RBC analysts.
That said, underlying momentum remains mixed. Manufacturing continues to face pressure from U.S. tariffs, housing activity softened toward year-end and retail sales showed limited growth. Overall, the quarter appears soft but broadly in line with the Bank of Canada’s expectations.
In the U.S. the consensus for the core PPI m/m is 0.3% vs. 0.7% prior and for the PPI m/m is 0.3% vs. 0.5% previously.
Softer than expected PPI could reinforce a disinflation narrative, while a stronger print could delay expectations of future Fed rate cuts
