Fed is expected to hold interest rates despite Trump's pressure.
Reports on US GDP, PCE, and employment in focus as the tariff deadline of August 1 approaches.
BoC and BoJ decisions, inflation in the Eurozone and Australia are also under scrutiny.
🇺🇸Fed is likely to remain on hold, risking #Trump's wrath.
The Federal Reserve is expected to hold rates unchanged for the fifth consecutive time at Wednesday's meeting, even as President Trump continues his push for lower rates.
However, with growing divisions within the Fed and September just one meeting away, Chairman Powell may need to signal a potential rate cut. While CPI and NFP data in June showed strength, a deeper look revealed a slowdown in private employment growth. Powell faces pressure but also uncertainty as key data like the next PCE and NFP reports are released only after the meeting.
DOWISH tilt could currently be the best middle option, potentially keeping the dollar supported - but not immune to volatility.
US macro calendar: dominated by NFP, PCE, and GDP.
Busy week of $usd US data includes:
Tuesday: Home prices (Case-Shiller), Consumer Confidence, JOLTS job openings.
Wednesday: ADP jobs, GDP growth in Q2 (expected recovery to 2.5%).
Thursday: Core and total PCE inflation (core at 2.7%), unemployment data, Chicago PMI.
Friday: July NFP (forecast: +102 thousand), unemployment at 4.2%, ISM Manufacturing PMI.
Weak NFP or lower PCE inflation could revive bets on rate cuts in September. On the other hand, a surprising GDP print or sticky PCE may delay the next move.
🇯🇵Will BoJ stir speculation of a rate hike?
As the trade agreement between the US and Japan is in effect, the BoJ may revise its inflation and growth forecasts upward in its quarterly outlook.
🗓️Two-day meeting concludes on Thursday, with no policy change expected. However, hawkish moves could further boost the yen - especially if retail and industrial production also rise.
🇨🇦BoC will hold steady while Canada faces US tariff threats.
The Bank of Canada is also expected to keep rates at 2.75% on Wednesday. While inflation rises, recession risks grow due to potential US tariffs of 35% on Canadian goods.
📊GDP on Thursday in May will offer more clarity, but without a resolution on USMCA, BoC is likely to remain cautious. The risk of a Canadian dollar decline remains if trade tensions escalate.
Likely muted reaction to Eurozone data.
As the agreement with the US is still in progress, the ECB is likely to wait for some time. Traders are watching:
🗓Wednesday: Flash GDP for the second quarter.
🗓Friday: Flash CPI for July.
Unless inflation surprises significantly, don't expect this to change the mood towards the euro.
🇦🇺CPI could decide for RBA cut in August.
Australian CPI for the second quarter (Wednesday) is crucial. The RBA skipped a cut in July, citing data dependence. If the trimmed mean and weighted median diverge significantly, markets could price in a rate cut in August.
📉Stronger CPI than expected could push the Australian dollar higher as easing bets fade.
🗓Also watch: Chinese manufacturing PMI for July on Thursday, a key driver for AUD and NZD.