The Week Ahead: US Inflation to Impact Bets on an H1 2024 Fed Rate Cut

The US Dollar

On Tuesday, the US CPI Report will warrant investor attention. After the US Jobs Report, softer-than-expected inflation figures could refuel bets on a May Fed rate cut.

Producer prices and retail sales will also need consideration on Thursday. Softer producer prices could signal a weakening demand environment. However, a larger-than-expected rise in retail sales could test any expectations of a weakening demand environment.

On Friday, Michigan Consumer Sentiment figures for March will draw investor attention. The higher unemployment rate must impact consumer confidence to signal a pullback in consumer spending. Investors must consider the sub-components, including consumer and inflation expectations.

Other stats include jobless claims, inventories, trade, manufacturing, and industrial production numbers. However, the numbers will likely play second fiddle to the inflation, consumption, and confidence data.

There will be no FOMC member speeches to consider. The FOMC entered the blackout period on March 9.

The EUR

Inflation figures from Germany (Tues) will kick-start the week for the EUR/USD. Downward revisions to preliminary numbers for February would support investor bets on a June ECB rate cut.

On Wednesday, industrial production numbers for the Eurozone will garner investor interest. Recession risks linger, with the German economy struggling to reboot. Weaker-than-expected numbers could fuel fears of a Eurozone economic recession.

Finalized inflation numbers from France will need consideration on Friday. Consumer prices remain an area of interest after ECB Staff lowered inflation and growth forecasts for 2024.

With inflation in focus, investors must track ECB member commentary. ECB Chief Economist Philip Lane is on the calendar to speak on Friday. ECB Executive Board members Piero Cipollone (Mon/Wed), Luis de Guindos (Tues/Thurs), Claudia Buch (Tues), Kerstin af Jocknick (Wed), Frank Elderson (Thurs), Isabel Schnabel (Thurs) will also deliver speeches.

The Pound

On Tuesday, UK labor market data will influence buyer demand for the Pound. Softer-than-expected average earnings and a higher unemployment rate could influence bets on a Bank of England rate cut.

However, the GDP Report for January also needs consideration. A resilient UK economy could enable the BoE to keep rates elevated to ensure a sustainable fall in inflation toward the target.

On Friday, house price figures will draw investor interest. Downward trends in house prices could signal a deteriorating macroeconomic environment.

Beyond the numbers, Bank of England commentary will also move the dial. Monetary Policy Committee member Catherine Mann is on the calendar to speak on Monday and Tuesday. Views on the timeline for interest rate cuts need consideration.

The Loonie

On Friday, housing sector data from Canada could influence buyer demand for the Loonie. A downward trend in housing starts could fuel bets on a Bank of Canada rate cut. The housing sector is a leading economic indicator for developed economies.

Other stats include wholesale sales and foreign securities purchases. The numbers are unlikely to influence BoC monetary policy goals.

However, crude oil inventories and the OPEC Monthly Report could impact near-term USD/CAD trends.

The Australian Dollar

On Monday, Australian building approvals and business confidence figures will influence the buyer appetite for the  Aussie dollar. The housing sector is a focal point for the RBA, with inflation and interest rates impacting households. A deteriorating housing sector could affect consumer confidence and spending.

However, business confidence also needs consideration. A fall in business confidence could signal a pullback in job creation that could impact private consumption.

On Friday, consumer inflation expectation numbers for March warrant investor attention. The RBA left a rate hike on the table in February, citing concerns about household spending. Expectations of an elevated inflation environment may impact consumer spending.

From elsewhere, the PBoC will announce the 1-year MLF on Friday, with housing sector data (Fri) and chatter from Beijing also needing consideration.

Beyond the numbers, investors must consider RBA commentary. RBA Chief Economist Sarah Hunter is on the calendar to speak on Tuesday. Views on inflation, the economic outlook, and the RBA rate path could move the dial.

The Kiwi Dollar

On Tuesday, electronic card retail sales numbers for New Zealand may impact buyer demand for the Kiwi dollar. An unexpected jump in sales could refuel bets on an RBNZ rate hike.

Food inflation figures also need consideration on Wednesday. The numbers will influence the RBNZ interest rate trajectory. In March, the RBNZ stated that inflation risks were more balanced. Softer-than-expected numbers could fuel bets on a 2024 RBNZ rate cut.

On Friday, Business PMI for February will also draw investor interest. However, investors must consider the sub-components, including employment and new orders. A weaker labor market environment could impact consumer spending and dampen demand-driven inflation.

From elsewhere, economic data from China, PBoC moves, and chatter from Beijing also need consideration.

The Japanese Yen

On Monday, finalized Q4 GDP numbers for Japan could impact the appetite for the Japanese Yen. According to preliminary numbers, the Japanese economy contracted in Q4. Revisions may influence the timeline for a Bank of Japan pivot from negative rates.

Producer price figures for February also need consideration on Tuesday as a leading indicator for consumer price inflation. Upward trends in producer prices may signal a higher consumer price inflation environment. Producers increase prices in a tighter demand environment, passing prices onto consumers.

With the Japanese economy and inflation trends in focus, investors must track BoJ commentary. Views on wage negotiations and the timeline for a pivot from negative rates would move the dial.

Out of China

On Monday, vehicle sales figures from China will garner investor interest. Downward trends in sales could impact riskier assets. New loans also need consideration on Tuesday. An increase in new loans could signal an improving demand environment.

Housing sector data will draw investor attention on Friday. The House Price Index will reflect the impact of policy measures to bolster the housing sector.

However, central bank activity and chatter from Beijing will likely impact riskier assets more. On Friday, the PBoC will set the 1-year MLF.