Highlights
- US retail sales, labor market numbers, and Fed commentary to influence bets on a March Fed rate cut.
- The euro area and UK economies will be in the spotlight, with economic indicators to dictate sentiment toward BoE and ECB interest rate cuts.
- Economic indicators from China will influence market risk sentiment on Wednesday.
The US Dollar
On Tuesday, NY Empire State Manufacturing will draw investor interest. Improving manufacturing sector conditions would support expectations of a soft landing. However, US retail sales figures (Wed) for December warrant investor attention.
A sharp upswing in retail sales could fuel demand-driven inflation and force the Fed to delay cutting interest rates.
On Thursday, US jobless claims and Philly Fed Manufacturing numbers will be in focus. Steady labor market and manufacturing sector conditions would further support bets on a soft landing.
Michigan Consumer Sentiment numbers for January will wrap up a busy week for the US dollar. An unexpected rise in consumer sentiment could signal an upward trend in consumer spending.
Beyond the numbers, investors must monitor FOMC member commentary. FOMC members Christopher Waller, Michael Barr, John Williams, Raphel Bostic, and Mary Daly are on the calendar to speak.
The EUR
The German and Eurozone economic indicators, inflation, and the ECB will put the EUR/USD in focus.
On Monday, German wholesale prices and GDP numbers for 2023 warrant investor attention. The EUR/USD could face pressure if the German economy contracts more than expected. However, Eurozone industrial production and trade data also need consideration.
Euro area numbers suggest a slide in industrial production but improving trade terms. However, the numbers are unlikely to influence ECB policy goals.
Finalized German inflation numbers and ZEW Economic Sentiment figures for Germany and the Eurozone could have more impact. Upward revisions to preliminary inflation numbers and improving sentiment toward the economy could reduce bets on a Q1 ECB rate cut.
On Wednesday, finalized Eurozone inflation numbers for December will garner investor interest. However, German producer prices (Fri) also need consideration. Upward trends in producer prices could signal a pickup in demand-driven inflation.
Beyond the numbers, the ECB monetary policy meeting minutes (Thurs) and ECB commentary will move the dial. ECB President Christine Lagarde is on the calendar to speak.
The Pound
On Tuesday, labor market figures will put the Pound in focus. Wage growth remains a bugbear for the Bank of England. Softer wage growth and a rising UK unemployment rate could fuel bets on a Q1 BoE rate cut.
On Wednesday, UK inflation numbers for December will also influence expectations on the timing of a BoE rate cut.
However, retail sales figures (Fri) also warrant investor attention. An upward trend in consumer spending could fuel demand-driven inflation and BoE delay discussions on rate cuts.
Other stats include housing sector data (Thurs) that will likely have a limited impact on BoE policy intentions.
Beyond the numbers, BoE commentary and the BoE Credit Conditions Survey (Thurs) would also move the dial.
The Loonie
On Monday, the BoC Business Outlook Survey will kickstart the week for the Loonie. An upbeat survey could allow the Bank of Canada to delay rate cuts. However, inflation numbers on Tuesday could be pivotal. Softer-than-expected numbers could raise bets on a Q1 BoC rate cut.
On Friday, investors must consider retail sales figures. A jump in consumer spending could fuel demand-driven inflation and influence BoC policy goals.
Other stats include wholesale sales, housing, and RMPI numbers. However, these will likely have a limited impact on the Canadian dollar.
The Australian Dollar
On Tuesday, consumer confidence numbers for January will influence buyer demand for the Aussie dollar. An upward trend in consumer confidence could signal a pickup in consumer spending. Consumer spending could fuel demand-driven inflation and force the RBA to delay plans to cut rates.
On Thursday, Australian labor market numbers will also influence near-term trends. Tight labor market conditions could increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.
From elsewhere, economic indicators from China also need consideration. China accounts for one-third of Australian exports. An improving demand environment would support the Australian economy and the Aussie dollar. Australia has a trade-to-GDP above 50%, with 20% of the workforce in trade-related jobs.
The Kiwi Dollar
On Tuesday, NZIER Business Confidence numbers impact buyer demand for the Kiwi dollar. Improving confidence could signal a pickup in job creation, a positive for the New Zealand economy.
However, electronic card retail sales (Wed) and business PMI numbers (Fri) will likely have more impact. Better-than-expected numbers could further delay RBNZ plans to cut interest rates.
The Japanese Yen
Inflation numbers will put the Japanese Yen and the Bank of Japan in the spotlight. The numbers on Friday could further reduce bets on a Bank of Japan pivot from negative rates.
However, wage growth negotiations in March remain the focal point. An upswing in wage growth could counter softer inflation numbers and allow the BoJ to exit negative rates in Q2.
Before the inflation numbers, industrial production (Thurs) and machinery orders (Thurs) need consideration. A weakening economic environment could give the BoJ more reason to leave interest rates in negative territory.
Investors must also monitor Bank of Japan guidance on monetary policy throughout the week.
Out of China
On Wednesday, the Chinese economy will be in the spotlight again. Q4 GDP numbers will draw investor attention. However, investors must consider industrial production, retail sales, fixed asset investment, and unemployment numbers. A pickup in economic activity in December could counter softer-than-expected Q4 GDP numbers.
Beyond the numbers, investors must monitor stimulus chatter from Beijing.
