Monday is expected to be a quiet day for the FX market, with few scheduled economic events. Tuesday will bring the Bank of Japan’s monetary policy announcement as the main highlight, while in the U.S., attention will turn to the retail sales m/m data.
Wednesday features key inflation data from the U.K., along with U.S. unemployment claims. The most anticipated event of the day will be the FOMC monetary policy announcement.
New Zealand will release its GDP q/q figures on Thursday; Australia will publish employment change and the unemployment rate; Switzerland will have the SNB monetary policy announcement, and the U.K. will hold its BoE meeting.
Friday wraps up the week with retail sales m/m data from both the U.K. and Canada.
At this week’s meeting, the BoJ is widely expected to keep its monetary policy unchanged at 0.5%. However, the focus will be on whether the Bank signals any potential adjustments to its bond-purchasing program. While there has been some discussion about a possible halving of quarterly Japanese Government Bond (JGB) purchases to 200 billion yen, such a move is unlikely at this stage.
Looking ahead, analysts from Wells Fargo anticipate some softness in exports and machinery orders, reflecting external headwinds such as ongoing trade tensions and slowing global demand.
On the inflation front, price pressures are expected to remain elevated, with core CPI potentially rising to 3.7% in May. The BoJ continues to face a challenging balancing act between weak economic momentum and stubborn inflation.
In the U.S., the consensus for core retail sales m/m is 0.2 percent, up from the prior 0.1 percent, while headline retail sales are expected to decline by 0.6 percent, compared to the previous 0.1 percent increase.
April retail sales rose slightly by 0.1 percent, showing some resilience after strong results in March. However, a decline in the core control group points to weakening consumer momentum, with tariff-related uncertainty still acting as a headwind.
For this week’s data, a notable drop in headline retail sales is expected, mainly due to weaker auto sales. Analysts note that modest gains in other categories suggest that consumption is slowing, but not stalling.
At this week’s meeting, the FOMC is expected to keep the federal funds rate unchanged and indicate that monetary policy remains in a holding pattern.
Recent U.S. economic data have generally held up. While there has been some cooling in the labor market since the beginning of the year, the unemployment rate has remained steady at 4.2 percent since March.
Inflation data surprised to the downside, which is encouraging for the Fed. However, inflation remains a concern, and that’s the main reason the Fed is unlikely to adjust its policy for now.
Traders will also closely watch the updated Summary of Economic Projections (SEP), which may show a modest upward revision to inflation and a weaker growth outlook. The median rate forecast, or dot plot, could indicate slightly less easing ahead, reflecting ongoing inflation risks and uncertainty surrounding trade policy.
At this week’s meeting, the SNB is expected to deliver a 25 bps rate cut, bringing the policy rate to 0.00%. Swiss inflation dipped into negative territory in May, and core price pressures continue to ease. Headline inflation fell to 0.1% y/y, while core inflation slowed to 0.5%, reinforcing the disinflation trend.
Despite this, underlying economic activity has shown resilience. First-quarter GDP grew by 0.5% q/q (0.8% when adjusted), and sentiment in the services sector remained solid, even as manufacturing continued to lag. Given the combination of weak inflation and stable growth, a one-time rate cut appears likely, while the prospect of further easing beyond June currently seems less probable.
The BoE is widely expected to keep its monetary policy unchanged at 4.25%, as policymakers balance persistent inflation with signs of a softening labor market.
April inflation data in the U.K. surprised to the upside, with headline CPI rising to 3.5%, while core and services inflation also remained elevated. Although this may prove temporary, underlying price pressures remain a concern. However, analysts from Wells Fargo note that slowing wage growth and a modest increase in unemployment suggest weakening demand.
Given the current backdrop, the BoE is expected to stay on hold at this meeting, with a 25 bps rate cut anticipated in August. If growth and labor market trends continue to weaken, a more sustained easing cycle could begin later this year.
In Canada, the consensus for core retail sales m/m is -0.2% versus the previous -0.7%, and for overall retail sales m/m, 0.5% versus the prior 0.8%.
April retail sales are expected to confirm ongoing resilience in consumer spending, despite persistent weakness in confidence indicators. Preliminary figures suggest a 0.5% monthly gain, building on March’s solid 0.8% increase, with RBC cardholder data indicating that momentum likely extended into May.
Although auto sales declined in April and May, they only partially offset the surge seen in March, which was driven by tariff-related concerns. Core retail activity has remained firm, supporting the view that underlying demand is stable.
However, with consumer sentiment still hovering near historic lows and uncertainty around tariffs persisting, spending is expected to cool in the second half of the year, especially in big-ticket categories like autos and housing, analysts from RBC noted.
