On Tuesday, Japan will release its monetary policy meeting minutes along with the BoJ core CPI y/y data. In the U.S., the focus will be on CB consumer confidence, new home sales data, and the Richmond manufacturing index.
Friday’s data releases include Tokyo’s core CPI y/y for Japan, retail sales data for the U.K., and GDP m/m for Canada. In the U.S., key reports will include the core PCE price index m./m, personal income and personal spending data, as well as revised University of Michigan consumer sentiment and inflation expectations.
The PMI survey for the eurozone and the U.K. will be closely monitored, with the consensus pointing to an overall improvement in the data. Recently, optimism has grown among investors regarding Germany’s plans for significantly looser fiscal policy. Analysts from MUFG point out that such changes typically take time to be implemented, but they could boost business confidence in the meantime. However, uncertainty surrounding Trump’s proposed tariffs remains a challenge.
Recently, consumer sentiment has become increasingly important as it offers a clearer picture of the economy. Any further decline could signal weakening economic growth and influence future policy decisions.
Australia’s monthly CPI rose by 2.5% y/y in January, aligning with Westpac’s forecast and slightly below the market median of 2.6%. On a monthly basis, the CPI Indicator fell by 0.2%. The trimmed mean CPI for January increased to 2.8% y/y, slightly up from 2.7% in December.
Westpac’s forecast for February is 0.0% m/m and 2.5% y/y, as the month typically experiences seasonal softness. When seasonally adjusted, the forecast suggests a 0.2% monthly increase.
Headline CPI is projected to decline marginally, but the broader trend remains upward throughout 2024. With energy prices no longer providing deflationary relief, CPI is forecast to approach 4% in the second half of the year. Services inflation is expected to improve gradually, with a modest decline in February followed by further progress in the spring.
The BoE is still anticipated to deliver a rate cut in May, but it's unclear if it will continue with cuts at a quarterly pace after that because inflation is expected to rise in Q3.
Analysts from Wells Fargo note that in January, the U.S. experienced a record surge in industrial supply imports from Canada, which significantly impacted Q1 GDP growth estimates, with some projections even turning negative. Durable goods orders also rose by 3.2%, marking the third-largest monthly gain in three years.
The consensus for Tokyo core CPI y/y is 2.2%, unchanged from the previous reading.
As anticipated, the BoJ kept its interest rates unchanged at 0.50% and reiterated its belief that inflation will reach its target in the second half of its three-year forecast period. However, the Bank also acknowledged persistent uncertainties regarding the impact of foreign trade policies and exchange rate.
A 0.3% increase would push the y/y measure to around 2.75%, up from 2.65% in January and this could influence the Fed’s decision to maintain current interest rates, though Chair Powell has indicated that the central bank is willing to tolerate short-term inflation fluctuations and still intends to cut rates later this year.
Wall Street Journal's Nick Timiraos pointed out that while CPI and PPI were softer in February compared to January, the components feeding into PCE were not.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
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