The week will start off quietly with no significant data releases scheduled for Monday that could impact the FX market. On Tuesday, the focus in Australia will be the RBA monetary policy announcement while in the U.K., we’ll see the average earnings index 3m/y, claimant count change, and the unemployment rate. For the U.S., the key release will be inflation data.
Wednesday brings Australia’s wage price index q/q and Canada’s BoC summary of deliberations. On Thursday, Australia will release employment change and the unemployment rate, while the U.S. will report PPI m/m and unemployment claims.
Friday’s U.S. releases include retail sales m/m, preliminary UoM consumer sentiment, and preliminary UoM inflation expectations.
At this week’s meeting, the RBA is widely expected to deliver a 25 bps rate cut, lowering the cash rate to 3.60% from 3.85%. At the previous meeting, the Bank surprised markets by holding rates steady, citing persistent inflation, strong household spending, and tight labor market conditions as key factors.
However, recent data point to a more cautious outlook, according to Wells Fargo analysts. Inflation eased in Q2, with headline CPI rising just 2.1% y/y, below forecasts, and core inflation comfortably within the RBA’s target range. Labor market momentum has also softened, with June job growth falling well short of expectations and unemployment edging up to 4.3%.
Wage growth figures, which will be released after the meeting, will be closely watched as they could significantly influence the policy path. Markets anticipate additional rate cuts in November and early next year, though the timing will remain data-dependent amid ongoing global uncertainty.
In the U.K., the consensus for the average earnings index 3m/y is 4.7% vs 5.8% prior; for the claimant count change, 20.8K vs 25.9K prior; and the unemployment rate is expected to hold at 4.7%.
The Bank of England struck a surprisingly calm tone on the labor market in its August policy decision, despite payroll employment steadily declining in recent months. This month’s jobs report may show another notable drop in hiring, though it’s worth remembering that these figures are often revised higher in subsequent releases.
In the U.S., the consensus for core CPI m/m is 0.3% vs 0.2% prior; CPI m/m is 0.2% vs 0.3% prior; and CPI y/y is 2.8% vs 2.7% prior. This week’s data will be pivotal in determining whether the Fed moves to cut rates. For July, inflation is expected to show that tariffs continue to push prices higher.
Core CPI rose 0.3% last month, the strongest monthly gain in six months, lifting the y/y rate back to 3.0%. The increase reflects rising goods prices that are no longer being offset by easing service costs. Headline inflation is seen rising a more modest 0.2%, supported by falling gas prices and slower food price growth.
It’s too early to tell who the tariffs will impact the most: end-consumers, domestic producers, or foreign exporters, Wells Fargo said. While prices are expected to rise, there is little indication of a sharp acceleration ahead due to increasing consumer fatigue. Markets still anticipate a 25 bps Fed rate cut in September, driven largely by signs of a weakening labor market.
In Australia, the consensus for employment change is 25.3K vs 2.0K prior, and the unemployment rate is expected to edge down from 4.3% to 4.2%.
Australia’s June jobs report fell short of expectations, with employment growing by a measly 2.0K versus the forecasted 20K and the unemployment rate reaching its highest level since 2021 at 4.3%. Labor figures for July will be scrutinized to see if the weakness in hiring and the climb in unemployment are continuing.
In the U.S., the consensus for core retail sales m/m is 0.3% versus the prior 0.5%, while retail sales m/m are expected at 0.5% versus the prior 0.6%. Analysts at Wells Fargo, however, project a 0.6% increase in July retail sales, noting that much of this strength likely stems from temporary factors rather than sustained momentum.
A sharp rebound in auto sales, up 7% from June to a 16.4 million annualized pace, combined with higher prices, is expected to lift the headline figure. Excluding autos, sales are forecast to rise just 0.3%, in line with goods price increases, suggesting real sales were flat for the month.
Recent patterns indicate consumers are turning more cautious, with discretionary goods spending declining for three consecutive months and discretionary services also softening. Weaker labor market conditions and concerns about tariff-driven price pressures appear to be driving more selective spending behavior.
This article was written by Gina Constantin at investinglive.com.