On Monday, the economic calendar is relatively light. In Canada, BoC Governor Macklem will deliver a speech titled "Workers, Jobs, Growth, and Inflation—Today and Tomorrow" at the Winnipeg Chamber of Commerce.
Tuesday brings inflation data for Canada, as well as the CB consumer confidence and the Richmond manufacturing index for the U.S.
On Wednesday, attention will be focused on Australian inflation data and new home sales in the U.S.
Thursday features BoE Governor Bailey's press conference in London about the Financial Stability Report for the U.K. In the U.S., we will see the final GDP q/q, unemployment claims, durable goods orders, and pending home sales m/m.
On Friday, Japan will release the Tokyo core CPI y/y, while in the U.S., we will get the core PCE price index m/m, personal income m/m, personal spending m/m, revised UoM consumer sentiment, and revised UoM inflation expectations.
Inflation data in Canada this week is widely anticipated to assess if there is continued progress. Expectations for the y/y data suggest a further slowdown to 2.6%, while the consensus for the average core measures is also likely to decline to around 2.7%.
As a reminder, the BoC recently delivered a 25 bps rate cut, and if it is proven that inflation is on the right path towards the Bank's 2% target, additional rate cuts are expected. At the last meeting, the BoC noted that there are enough signs that inflation is dropping.
The market now anticipates further rate cuts in July, September and October. On the other hand, if inflation surprises to the upside, it is possible that the Bank will skip one of the expected cuts.
In Australia, inflation has proven more resilient, dropping more slowly compared to other countries. For this week's data, the CPI y/y is expected to rise from 3.6% to 3.8%. However, analysts from Citi pointed out that the focus should be on the components of the price rise rather than on the headline inflation as a whole. One aspect to monitor will be the broader services inflation categories, which are usually measured in the second month of the quarter. The outlook is not very optimistic and the RBA still has more work to do.
Tokyo core CPI y/y (excluding fresh food) is expected to rise from 1.9% to 2.0%. Analysts from Citi argue that this increase is due to the halving of government subsidies for electricity and gas prices. They pointed out that this trend will also be reflected in the July data when the subsidies will be terminated.
The consensus for the U.S. core PCE price index m/m is 0.2% vs prior 0.2%. Personal income m/m is expected to increase by 0.4% vs prior 0.3% and personal spending m/m is anticipated to rise by 0.3% vs 0.2%.
According to Wells Fargo, there are indications that the previously resilient consumer spending is starting to soften, as evidenced by the weaker May retail sales data and downward revisions to prior months. However, it will still see some marginal growth due to lower prices, strong hiring and wage increases.
Given the soft May CPI and PPI, the PCE deflator -- the Fed's preferred inflation gauge -- is expected to rise by just 0.1%, leading to a 2.6% annual rate. This would be a positive step in fighting inflation, but the Fed is likely to wait for more progress before cutting rates.
