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CPI, retail sales and housing set the tone for next week’s FX watch

The outlook centers on cooling headline inflation tied to falling energy prices, plus a forecast 0.3% retail sales decline linked to lower gasoline costs.

Reported · Written up by our desk · Central Banks

Ahead of next week’s key data, Action Forex expects headline CPI to cool, largely because energy prices are forecast to decline. The note also points to retail sales weakness, with lower gasoline prices expected to weigh on consumer spending in the June reading.

For inflation, the analysis estimates CPI fell 0.2% over the month, helped by an roughly 10% drop in the price of energy goods, while food prices are expected to have risen after a subdued May. It also estimates core CPI rose 0.2%, with core goods inflation expected to firm, including from vehicles, even as core services inflation should moderate in June.

The briefing adds that inflation dynamics may still be driven by lagging supply-chain effects from earlier energy and transportation cost increases. It also flags primary shelter inflation as due for a “payback” after May’s above-trend gain, while travel-related services could see some relief as lower jet fuel costs soften airfares.

On the consumer side, Action Forex forecasts overall retail sales to decline 0.3%, reflecting about a $0.50 drop in average pump prices during the month. The note says housing starts are expected to rebound, and that in Canada the BoC is expected to keep rates unchanged, while India’s CPI is expected to rise and China’s Q2 GDP growth is expected to slow.

Latest closeGasoline (RBOB) $2.820 ▼7.2%

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