The RBA kept interest rates unchanged last week and emphasized the potential for future rate increases in case inflation rises again. The Bank is currently taking a wait-and-see approach to gauge the impact of past tightening.

The BoE hiked rates by 25bps which was widely expected and priced in by the market. The meeting was interpreted as dovish due to a change in the forward guidance that signaled the monetary policy is "restrictive." As a reminder, inflation remains very high in the U.K., but it has dropped more than expected recently giving hope to the BoE that it will return to target in a reasonable timeframe. The wages have also remained robust, so future rate hikes are on the table.

In the U.S. the labor market data was mixed. The economy added 187K jobs, below consensus, but the unemployment rate dropped from 3.6% to 3.5% and the average hourly earnings printed above expectations which could make it more difficult to bring inflation to target.

The upcoming week is expected to be relatively light, which is typical for the week following the NFP. On Monday, a few FOMC members are scheduled to deliver their remarks, while Canada observes a Bank Holiday in honor of Civic Day.

Moving to Tuesday, Australia's agenda includes the release of the Westpac consumer sentiment and NAB Business Confidence data. Wednesday will see a focus on New Zealand, with the unveiling of inflation expectations for the quarter.

Thursday is set to be a significant day, with all attention directed toward the U.S. CPI data and the unemployment claims report. Finally, Friday brings a series of important U.S. indicators, including Core PPI m/m, PPI m/m, Preliminary UoM Consumer Sentiment, and Preliminary UoM Inflation expectations.

In Australia, recent increases in interest rates have exerted downward pressure on consumer confidence. However, the decision by the RBA to maintain the current interest rates could potentially paint a more positive outlook for many households, a factor that may manifest in this week's data. Consumers have been grappling with elevated prices and heightened borrowing expenses. It's worth noting that the overall consumer sentiment in Australia remains very low at 81.3, with a modest increase of just 2.7% observed last month.

Two-year inflation expectations for New Zealand dropped in June and this week's data is likely to continue that trend. However, the downward trend in actual inflation appears to be more gradual with some stickiness along the way. As a reminder, headline inflation in the country dropped from 6.7% at the beginning of the year to 6.0%.

The CPI data for the U.S. will be important to watch. Inflation in the U.S. cooled down lately, but there could be an uptick in y/y inflation data due to higher energy prices this summer compared to last one. That said, the Fed will be focused on the m/m data and hope it will be in line with their expectations to bring inflation back to its 2% target. The Bank needs to have clear and consistent indications that inflation will drop before it can signal the end of the hiking cycle.

The consensus for both the U.S. Core PPI and PPI m/m is for 0.2% compared to 0.1% prior.

The Prelim UoM consumer sentiment is expected to rise modestly from 71.6 to 71.7. The Prelim UoM Inflation expectations will also be published on Friday.

This article was written by Gina Constantin.