The Week Ahead: The US CPI Report and Fed Chatter in the Spotlight

The US Dollar

On Monday, NY Fed 1-Year Consumer Inflation Expectation figures will kick-start the week for the US dollar. A pickup in consumer inflation expectations could lead to decreased consumer spending as individuals may adjust their expenditure plans in anticipation of higher inflation.

However, the US CPI Report will impact the US dollar more on Wednesday. Sticky inflation could materially affect bets on a June Fed rate cut.

With inflation in the spotlight, producer price figures will garner investor interest on Thursday. Producers may increase prices in a high-demand environment, passing prices onto consumers. Investors must also consider US labor market data on Thursday after the larger-than-expected increase in jobless claims in late March.

On Friday, Michigan Consumer Sentiment figures will move the dial. A drop in consumer sentiment could signal a downward trend in consumption and support a June Fed rate cut.

Beyond the numbers, the Fed will be in the spotlight. Monitoring FOMC member reactions to the inflation figures is crucial. On Wednesday, the FOMC meeting minutes will also be out. However, the recent Jobs Report and inflation figures could limit the impact of the minutes on the US dollar.

The EUR

The German economy will be in the spotlight on Monday. German industrial production and factory orders will draw investor interest. An improving demand environment could drive buyer appetite for the EUR/USD.

Recent economic indicators from Germany have sent mixed signals, allowing investors to raise bets on a June ECB rate cut. Softer-than-expected numbers would align with ECB forward guidance.

On Thursday, the ECB will be in focus. The markets expect the ECB to leave interest rates at 4.5%. Unless there is a surprise ECB rate cut, the ECB press conference will likely have a greater impact on the EUR/USD. Forward guidance on the timing of an ECB rate cut and the interest rate trajectory for 2024 would move the dial.

On Friday, finalized French and German inflation numbers also need consideration. The EUR/USD will likely react to revisions to the preliminary numbers.

The Pound

On Tuesday, the BRC Retail Sales Monitor could impact buyer demand for the Pound. An upward trend could compel the markets to revise their bets on the Bank of England’s monetary policy objectives.

On Thursday, UK housing sector data and the Bank of England Credit Conditions Survey will warrant investor attention. Housing price trends could influence consumer confidence and private consumption. Upward trends in private consumption may fuel demand-driven inflation and affect the BoE rate path.

The monthly GDP Report will be in focus on Friday. The UK economy showed resilience at the turn of the year. Better-than-expected GDP numbers could influence investor bets on a Bank of England rate cut. Services sector trends need consideration as the contributor to inflation.

Beyond the numbers, Bank of England commentary needs monitoring. Bank of England Monetary Policy Committee Members Sarah Breeden and Megan Greene are on the calendar to speak.

The Loonie

The Bank of Canada will be the focal point for the Loonie. On Wednesday, the BoC will announce its March Monetary Policy Decision. Economists expect the BoC to leave interest rates at 5.0%. Barring an unexpected BoC rate cut, the focus will be on the monetary policy report and press conference.

Forward guidance on the timeline for a Bank of Canada rate cut and the frequency of rate cuts could move the dial.

Economic data includes building permits, out on Wednesday. However, the numbers will play second fiddle to the Bank of Canada.

The Australian Dollar

Home loan figures will draw investor interest on Monday. Upward trends in home loans could signal an improving macroeconomic environment. However, home loans are unlikely to affect the RBA rate path or the Aussie dollar.

On Tuesday, NAB Business Confidence will be in the spotlight. A decline in business confidence could signal a pullback in job creation. A deterioration in labor market conditions could impact household spending and curb consumer spending. A downward trend in consumer spending could enable the RBA to cut interest rates.

From elsewhere, economic indicators from China will also influence buyer demand for the Aussie dollar.

The Kiwi Dollar

On Tuesday, business confidence figures for Q1 will put the Kiwi dollar in focus. Improving business sentiment could signal an upward trend in investment and job creation.

However, the RBNZ interest rate decision could impact the Kiwi dollar more. Economists expect the RBNZ to leave interest rates at 5.5% on Wednesday. Barring a surprise RBNZ interest rate cut, the focus will be on the Rate Statement. There is no press conference.

On Friday, the Business PMI and electronic card retail sales will also need consideration. A rebound in consumer spending and rising new orders across the manufacturing sector would influence buyer demand for the Kiwi dollar.

Additionally, economic indicators from China will also impact the Kiwi dollar.

The Japanese Yen

On Monday, average cash earnings and overtime pay figures will be in focus. The February wage growth figures may have a limited impact on the Japanese Yen. Spring wage hikes supported a Bank of Japan pivot from negative rates.

However, consumer confidence and machinery tool orders (Tues) warrant investor attention.

A pickup in consumer confidence could fuel consumer spending and demand-driven inflation. Signals of higher private consumption trends could influence the Bank of Japan rate path. Machinery tool order trends need consideration as the BoJ remains cautious about the macroeconomic environment.

On Wednesday, inflation will be in focus. Producer price numbers for March could give investors signals about consumer price inflation trends. Producers hike prices in an increasing demand environment.

Finalized industrial production numbers for February will also draw investor interest. Revisions to the preliminary numbers need consideration.

Beyond the numbers, investors must consider Bank of Japan commentary and further intervention threats. BoJ Governor Kazuo Ueda is on the calendar to speak on Wednesday.

Out of China

On Thursday, inflation figures for March will garner investor interest. Recent macroeconomic indicators signaled an improving demand environment. A softer decline in producer prices and a pickup in consumer prices would align with recent economic data.

Trade data will also need consideration as investors assess the global demand environment. The focus will likely be on the import and export numbers.