On Tuesday, the focus will be on the RBA monetary policy announcement, followed later in the day by Canadian inflation data.
Finally, on Friday, Japan will publish its national core CPI y/y, while the U.K. and Canada will release their retail sales data.
Recently, inflation data in Australia has softened, with the trimmed mean CPI dipping to 2.9%, now within the RBA's target range. Headline inflation held steady at 2.4%.
The RBA is expected to continue cutting rates through the end of the year. However, Wells Fargo analysts argue that solid domestic data and easing China-U.S. trade tensions reduce the likelihood of further policy easing.
Analysts from RBC argue that Canada’s April CPI is likely to reflect a drop in headline inflation, primarily due to the removal of the consumer carbon tax on energy products at the beginning of the month. They emphasize that the distortion stems from a temporary federal tax relief measure, which included the GST rebate and ended in February. As a result, annual inflation is forecast to fall sharply from 2.3% in March to 1.6%.
Canadian food price growth is expected to remain elevated at 3.2% y/y in April, with core inflation rising to 2.6%. March retail sales, due this week, are expected to have rebounded to 0.7% from a February decline, driven by pre-tariff auto purchases. While auto sales likely dipped in April, broader consumer spending appears resilient despite weaker sentiment.
Analysts at ING emphasized that April’s inflation data carries extra weight, as it is typically the month when a wide range of services prices are reset for the year. Both April 2023 and 2024 delivered surprises that jolted markets, often with stronger-than-expected prints.
This week's PMI data for the eurozone will offer a clearer picture of how the economy is holding up. Last month, the services sector declined to 50.1, while manufacturing remained in contractionary territory at 49, and the composite PMI slipped from 50.9 to 50.4.
In Japan, the consensus for the national core CPI y/y is for an increase from 3.2% to 3.5%. This rise is largely attributed to the effects of reduced energy subsidies and new price hikes in sectors such as food and education. Tokyo CPI, often viewed as a bellwether, surprised to the upside earlier this month, climbing to 3.4% y/y, while the core print excluding fresh food and energy surged to 3.1%, its highest level in over a year.
As a reminder, the BoJ left rates unchanged at its May meeting but signaled openness to further hikes if inflation remains persistent. Uncertainty surrounding U.S. tariffs and signs of weakening global demand complicate the outlook.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
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