Market Outlook for the Week of 24th-28th February

Monday will start off slowly, with no significant economic data scheduled for the FX market.

On Tuesday, the U.S. will release CB consumer confidence and the Richmond manufacturing index. Wednesday’s focus will be on Australia’s inflation data, while Japan will report the BoJ Core CPI y/y. In the U.S., new home sales data will be released.

On Thursday, key U.S. data will include the preliminary GDP q/q, unemployment claims, and durable goods orders m/m. Friday will bring Tokyo Core CPI y/y for Japan, GDP m/m for Canada, and several important U.S. releases, including the Core PCE Price Index m/m, personal income m/m, and personal spending m/m.

Throughout the week, several FOMC members are expected to deliver remarks.

In Australia, the consensus for CPI y/y is 2.6%, compared to the previous 2.5%. Overall, there has been progress in reducing inflation, and last week, the RBA delivered its first rate cut in a long time.

Analysts at Westpac noted that January typically sees seasonal price declines, particularly in clothing, footwear, household goods, and holiday travel, which could contribute approximately -0.6 percentage points to the monthly figure. Additionally, ongoing Commonwealth government rebates may further dampen electricity prices.

While the inflation trend has stabilized in recent months, a softer reading in January would reinforce expectations of continued disinflation.

In the U.S., the consensus for new home sales data is 677K vs. 698K prior. A decline is expected in this week’s report.

Affordability remains a concern, with interest rates still relatively high and builder confidence dipping in January. Analysts at Wells Fargo suggest that while incentives have helped offset financing pressures, they have not fully revived demand.

The South remains a key region to watch, as recent hurricanes have negatively impacted sales but activity is expected to normalize. That said, elevated new home inventories and improving supply in the existing home market could limit any significant upward momentum. Overall, a slow and gradual recovery in home sales is expected throughout 2025.

In the U.S., the consensus for core durable goods orders m/m is 0.4% vs. 0.3% prior, while durable goods orders m/m are expected to rise 2.0%, compared to the previous -2.2%.

The recent decline in durable goods orders can largely be attributed to fluctuations in aircraft orders. Analysts at Wells Fargo suggest that this likely reflects Boeing’s weaker net orders, which were impacted by strike-related disruptions.

The rebound in durable goods orders may be due to businesses stockpiling goods ahead of potential tariff threats, as manufacturers rely on imported inputs.

The consensus for Tokyo’s core CPI y/y in Japan is a decline from 2.5% to 2.3%.

Rising prices for fresh food and service-sector costs, particularly in the dining industry, are likely to support inflation. However, government energy subsidies are expected to help offset broader price increases.

The Bank of Japan will closely monitor whether recent spikes in food prices, especially for rice, are being passed on to consumers. Overall, Japan’s economy shows signs of gradual recovery, as indicated by recent economic data.

ING analysts expect a rise in industrial production fueled by an increase in export demands as U.S. tariff threats loom. Retail sales are also expected to see a rise due to foreign tourism and wage improvements.

In Canada, the consensus for GDP m/m is 0.3%, compared to the previous -0.2%. Quarterly GDP is forecasted to be 1.5% on an annualized basis.

The Q4 growth was driven by consumer spending and a rebound in housing activity. However, business investment remains weak, with declining machinery and equipment imports and an uncertain global trade outlook weighing on sentiment, according to RBC.

The labor market remains resilient, and inflation has surprised to the upside, suggesting that the BoC is likely to keep rates on hold at its next meeting in March. Analysts caution that risks from potential tariff hikes remain high, which could dampen growth and influence the rate path later in 2025.

In the U.S., the consensus for the core PCE price index m/m is 0.3% vs. prior 0.2%, for personal income m/m is 0.3% vs. prior 0.4%, and for personal spending m/m is 0.2% vs. prior 0.7%.

This week’s report will place special attention on the core PCE price index to assess any signs of inflation persistence. Analysts at Wells Fargo anticipate a bigger 0.6% rise in personal income, driven in part by cost-of-living adjustments and wage growth. However, they expect personal spending to show only a modest 0.1% increase, as the sharp 0.9% drop in retail sales indicates a slowdown in goods consumption.

This trend suggests a potential moderation in demand, but with resilient income growth, spending could regain momentum in the coming months.

This article was written by Gina Constantin at www.forexlive.com.