UPCOMING
EVENTS:

• Monday: China Industrial Production and Retail Sales, US
  Retail Sales, US NAHB Housing Market Index.
• Tuesday: German ZEW, Canada CPI, US Housing Starts and
  Building Permits, US Import Prices, US Industrial Production and Capacity
  Utilization.
• Wednesday: BoJ Policy Announcement, FOMC Policy
  Announcement.
• Thursday: Australia Employment report, PBoC LPR, UK
  Employment report, BoE Policy Announcement, US Jobless Claims.
• Friday: Japan CPI, Canada Retail Sales.

Monday

The US Retail
Sales M/M is expected at 0.6% vs. -0.9% prior, while the ex-Autos figure is
seen at 0.4% vs. -0.4% prior. The focus will be on the Control Group figure
which is expected at 0.2% vs. -0.8% prior.

Consumer spending
has been stable in the past months which is something you would expect given
the positive real wage growth and resilient labour market. More recently though,
we’ve been seeing some easing in consumer sentiment due to the ongoing trade
wars and tariffs uncertainty which weighed on spending.

Tuesday

The Canadian CPI
Y/Y is expected at 2.2% vs. 1.9% prior, while the M/M reading is seen at 0.6%
vs. 0.1% prior. The Trimmed-Mean CPI Y/Y is expected at 2.8% vs. 2.7% prior,
while the Median CPI Y/Y is seen at 2.8% vs. 2.7% prior.

Inflation has been
inside the target band for almost a year although we’ve seen a slight uptick
recently as the aggressive easing from the BoC in the past year started to
positively affect economic activity.

The economic data
out of Canada has been picking up before the Trump’s trade war with Canada
started but more recently started to weaken as the uncertainty weighed on
consumer and business sentiment.

As a reminder, the BoC cut interest
rates by 25 basis
points to 2.75% as expected last week amid concerns over weaker growth ahead
due to the trade uncertainty and US tariffs. The central bank emphasized a
cautious approach to future decisions, balancing the upward pressure on
inflation against the downward pressure on weaker demand.

Governor Tiff
Macklem acknowledged the economic uncertainty, and he warned that a
prolonged trade war could slow GDP growth, weaken the job market, and push
inflation higher, creating a difficult policy environment.

The market didn’t
increase much the expectations for more easing by year-end but brought forward
the rate cuts expecting the central bank to offset the negative sentiment amid
the trade war. There’s a 52% chance of another 25 bps cut at the upcoming
meeting with a total of 45 bps of easing by year-end.

Wednesday

The BoJ is
expected to keep interest rates steady at 0.50%. The data recently started to
come out on the softer side and Governor Ueda didn’t sound like someone who’s
in a hurry to raise rates amid some uncertainty.

The Japanese firms
agreed to lower than demanded wage hikes. This didn’t change the market pricing of 31 bps of
tightening by year-end as traders await more data on the inflation front to
increase the expectations for another rate hike.

As a reminder, the
Tokyo CPI missed expectations recently with a notable dip towards the 2% handle.

The Fed is
expected to keep interest rates steady at 4.50-4.75%. The recent Fedspeak has
been leaning towards acknowledging some short-term uncertainty amid Trump’s
policies but still seeing solid growth.

Fed Chair Powell in
particular sounded very adamant on the current wait-and-see stance as he said
that the cost of being cautious are very very low and that the central bank
does not need to anything right now.

The US CPI and PPI
data last week despite coming in softer than expected increased the projections
for the Core PCE which is the Fed’s preferred inflation measure. This will add
to their reasons to remain on the sidelines for now.

The focus will be
on the SEP and especially on the Dot Plot as the market will be eager to see if
the central bank increases the projections from two to three rate cuts in 2025.
The market is pricing 70 bps of easing by year-end.

Thursday

The Australian
Employment report is expected to show 30K jobs added in February vs. 44K in
January and the Unemployment Rate to remain unchanged at 4.1%. As a reminder, the
RBA cut interest rates by 25 bps as expected recently bringing the Cash Rate
to 4.10% but it was accompanied by a more hawkish than expected guidance.

After the rate
decision, we got a strong Australian
Employment data and the
monthly Trimmed-Mean CPI ticked higher to 2.8% remaining near the upper bound
of the 2-3% target range. This report is unlikely to change anything for the
RBA unless we see a material weakening the data.

The UK
Unemployment Rate is expected to remain unchanged at 4.4%. The Average Earnings
are expected at 5.9% vs. 6.0% prior, while the Ex-Bonus Earnings are seen at
5.9% vs. 5.9% prior. Analysts continue to caution against the employment data
reliability and therefore it’s unlikely to influence interest rate expectations
much.

As a reminder, the
last report beat expectations across the board which continues to keep the BoE
in an uncomfortable position given the high wage growth and sticky inflation.
The market pricing didn’t change much though as we still have 54 bps of easing
expected by year-end.

The BoE is
expected to keep the Bank Rate unchanged at 4.50% with a 7-2 vote split. The
central bank remains in an uncomfortable position amid high wage growth and
sticky inflation. The last UK CPI beat expectations across the board with the
services inflation measure, which is what the BoE is more concerned about,
jumping back to the 5.0% handle from 4.4% prior. Therefore, it’s unlikely that
they will signal much other than keeping rates steady until they get more
confidence on the inflation front.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing
Claims continue to hover around cycle highs.

This week Initial
Claims are expected at 225K vs. 220K prior, while there’s no consensus at the
time of writing for Continuing Claims although the prior release saw a decrease
to 1870K vs. 1897K prior.

Friday

The Japanese Core
CPI Y/Y is expected at 2.9% vs. 3.2% prior. The Tokyo CPI is seen as a leading
indicator for National CPI, so it’s generally more important for the market
than the National figure. The last report showed the Tokyo Core CPI missing
expectations and dipping back near the 2.0% handle.