Monday starts slowly, with no significant economic events scheduled for the FX market. On Tuesday, the U.S. will release the core PPI m/m and PPI m/m data and Wednesday will feature inflation data releases for both the U.K. and the U.S.
On Friday, the U.K. will publish its retail sales data, while the U.S. will release reports on building permits and housing starts.
Market participants will closely watch this week's data for insights into the BoE's next steps on monetary policy. As a reminder, the BoE reduced the rate by a total of 50bps last year with cuts in August and November.
The BoE is likely not finished with rate cuts and will continue with once per quarter easing. However, if inflation data drops more than expected and economic growth is too slow, the Bank may accelerate its pace.
The m/m increase was primarily driven by rising energy and food prices, which will also contribute to lifting the headline inflation.
In Australia, the consensus for employment change is 14.5K, down from the previous 35.6K, with the unemployment rate expected to rise from 3.9% to 4.0%.
This week’s employment data will be closely watched, particularly if the unemployment rate rises to 4.0%. Such an outcome would align with the RBA's outlook, indicating that while the labor market remains tight, it is gradually cooling.
In the U.S., the consensus for core retail sales m/m is 0.5%, up from the previous 0.2%, while retail sales m/m are expected to rise by 0.6%, slightly below the prior 0.7%.
Separate high-frequency data from Bloomberg suggest some upside risk to the forecast, as non-store retailers and restaurants reported their largest monthly transaction increases since the first half of 2023 during December, the analysis said.
Wells Fargo analysts note that residential construction remains mixed. Single-family housing starts have risen 7.2% year-to-date through November, while multifamily starts have dropped by 27%, primarily due to an oversupply of new apartments. This weakness in the multifamily sector is expected to persist, as declining apartment building permit filings suggest continued subdued activity in the near term.
Meanwhile, the single-family market is showing resilience despite higher mortgage rates as builders are using price cuts and other incentives to address affordability issues. This contributed to a three-point rise in the National Association of Home Builders' future sales index, now at 66—the highest level since 2022. For December, housing starts are projected to rise by 2.4%, reaching an annual pace of 1.32M units.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
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