Week Ahead: CPI Cross-Currents, Retail Riddles, and Sentiment Swings
Week Ahead: CPI Cross-Currents, Retail Riddles, and Sentiment Swings
Inflation Takes the Mic: Tuesday’s U.S. CPI Showdown
The new trading week begins with America’s inflation pulse. Consensus sees core CPI rising 0.3 % MoM and 2.9 % YoY, fractionally softer than May’s 2.9 % print but still above the Fed’s comfort zone. A cooler number would embolden doves and knock the dollar, while a hot surprise could revive “higher-for-longer” chatter and extend the DXY’s two-week rebound. Markets have pared September-cut odds to barely 60 %, so even a tenth of a point miss risks repricing the entire curve.
Sterling’s Early Tailwind: BRC Retail Beats
Before U.K. traders even digest CPI, the BRC Retail Sales Monitor delivered a 0.6 % YoY gain—better than feared and a potential buffer for sterling after last week’s GDP wobble. Still, cable sits south of its 10-DMA at 1.3630 and needs a firm inflation print Wednesday to shake off talk of a BoE rate cut.
Wednesday Double-Header: U.K. CPI Meets U.S. PPI
U.K. CPI: Economists project a sticky 3.4 % YoY. A pop toward 3.5 %—in line with the BoE’s own Q3 peak forecast—would harden expectations that Governor Bailey keeps Bank Rate above 4 % into 2026. A downside miss, however, could see EUR/GBP chase 0.87 as traders revisit dovish rhetoric.
U.S. PPI: A modest 0.2 % gain is pencilled in. Given supply-chain frictions tied to tariffs, any broader pipeline inflation would amplify a CPI beat and squeeze front-end Treasuries. Conversely, a benign PPI could offset a lukewarm CPI, trapping EUR/USD in its 1.1650-1.1750 range.
Eurozone CPI on Deck: Thursday Check-In
Europe’s flash CPI held at 2 % last month, but investors will seek confirmation that the bloc’s disinflation trend is intact. A print above 2.1 % could complicate the ECB’s easing roadmap, while a softer release would leave Christine Lagarde free to cut again in September.
U.S. Consumers in the Spotlight: Retail, Claims, and Sentiment
Thursday’s Retail Sales are expected to tumble 0.9 % MoM, the first contraction since January. Weakness here, coupled with a drift higher in jobless claims, would reinforce fears that tariff angst is hitting the pocketbook just as student-loan repayments restart. Friday’s Michigan Sentiment (seen 61.5) and Housing Starts round out the consumer narrative. A bounce in sentiment could rescue the dollar late-week if inflation numbers disappoint.
Asia’s Wild Card: Japanese CPI and the Yen
Japan’s June CPI, due Friday, is forecast at 3.5 % YoY—another uncomfortable reading for the BoJ. The yen’s slide toward 148 per dollar has been driven by yield differentials and climbing commodity prices; a hotter CPI could stir speculation of a policy tweak, capping USD/JPY’s ascent.
Equity Angle: Earnings Season vs. Inflation Scare
Wall Street faces a dual test: mega-bank earnings and CPI. Analysts have slashed Q2 EPS growth expectations to 5.8 %, but bulls point to last quarter’s 78 % beat-rate for reassurance. A dovish CPI might extend the S&P 500’s 26 % rally from April lows; a miss could sharply tighten financial conditions, especially with Trump’s August-1 tariff tranche looming.
Volatility Hotspots This Week
GBP/USD: CPI divergence plus retail vs. inflation interplay.
EUR/USD: Eurozone CPI confirmation vs. U.S. consumer data.
USD/JPY: Japanese CPI and commodity-price sensitivity.
Netflix & Banks: Streaming subs and net-interest margins amid yield spikes.
