Wednesday features key inflation data from the U.K., along with U.S. unemployment claims. The most anticipated event of the day will be the FOMC monetary policy announcement.
Friday wraps up the week with retail sales m/m data from both the U.K. and Canada.
Looking ahead, analysts from Wells Fargo anticipate some softness in exports and machinery orders, reflecting external headwinds such as ongoing trade tensions and slowing global demand.
In the U.S., the consensus for core retail sales m/m is 0.2 percent, up from the prior 0.1 percent, while headline retail sales are expected to decline by 0.6 percent, compared to the previous 0.1 percent increase.
For this week's data, a notable drop in headline retail sales is expected, mainly due to weaker auto sales. Analysts note that modest gains in other categories suggest that consumption is slowing, but not stalling.
Recent U.S. economic data have generally held up. While there has been some cooling in the labor market since the beginning of the year, the unemployment rate has remained steady at 4.2 percent since March.
Traders will also closely watch the updated Summary of Economic Projections (SEP), which may show a modest upward revision to inflation and a weaker growth outlook. The median rate forecast, or dot plot, could indicate slightly less easing ahead, reflecting ongoing inflation risks and uncertainty surrounding trade policy.
Despite this, underlying economic activity has shown resilience. First-quarter GDP grew by 0.5% q/q (0.8% when adjusted), and sentiment in the services sector remained solid, even as manufacturing continued to lag. Given the combination of weak inflation and stable growth, a one-time rate cut appears likely, while the prospect of further easing beyond June currently seems less probable.
April inflation data in the U.K. surprised to the upside, with headline CPI rising to 3.5%, while core and services inflation also remained elevated. Although this may prove temporary, underlying price pressures remain a concern. However, analysts from Wells Fargo note that slowing wage growth and a modest increase in unemployment suggest weakening demand.
In Canada, the consensus for core retail sales m/m is -0.2% versus the previous -0.7%, and for overall retail sales m/m, 0.5% versus the prior 0.8%.
Although auto sales declined in April and May, they only partially offset the surge seen in March, which was driven by tariff-related concerns. Core retail activity has remained firm, supporting the view that underlying demand is stable.
However, with consumer sentiment still hovering near historic lows and uncertainty around tariffs persisting, spending is expected to cool in the second half of the year, especially in big-ticket categories like autos and housing, analysts from RBC noted.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
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