The market is poised for a slow start to the week with a focus on any unanticipated announcements from the U.S. administration, especially concerning tariffs. Tuesday will see the U.K. release data on the claimant count, average earnings, and unemployment. Canada will direct attention towards its inflation figures.
Wednesday will feature the U.K.’s inflation data and U.S. retail sales figures. Attention in Canada will be the Bank of Canada’s monetary policy announcement, with Fed Chair Powell addressing the Economic Club of Chicago. On Thursday, New Zealand presents its inflation data, Australia will reveal its employment change, and the eurozone will await the ECB’s monetary policy decision.
Uk Projections And Us Retail Sales
The U.K.’s projections include a claimant count change of 30.3K, down from 44.2K, with average earnings expected at 5.7%. The unemployment rate is anticipated to remain at 4.4%. In the U.S., core retail sales are projected at 0.4% m/m, with retail sales at 1.4%.
Canada’s expectations for CPI m/m is 0.7%, with other CPI measures holding around 2.9%. The BoC’s decision on rate cuts will weigh labour market concerns against recent inflation surprises. New Zealand’s CPI is forecast at 0.7% q/q and Australia anticipates a positive employment change of 40.2K.
The ECB is expected to make a 25 bps rate cut, with further reductions anticipated this year due to mixed eurozone economic signals and tariff uncertainties. Inflation improvements support these predictions, potentially reducing rates to 1.75% by year-end.
Market Expectations And Central Bank Decisions
This market snapshot sets the stage for a week guided by macroeconomic gauges across advanced economies, with particular emphasis on inflation readings, monetary policy shifts, and labour market conditions. What’s most striking is the granularity of the data releases, each providing precise clues about where policy direction may be heading.
The early part of the week appears set to open on a subdued note, with market participants on edge over potential sudden policy changes from Washington. Tariff manoeuvres remain an ever-present variable, and it’s as much the threat as the implementation that moves pricing in derivative instruments. Because these are rarely telegraphed far in advance, any verbal steer or press release could stir volatility in what might otherwise be a quiet session.
The UK, for its part, will release June labour data. Expectations show some relief in claimant counts and steady unemployment figures, suggesting a market neither overheating nor faltering. That 5.7% wage growth expectation stands out. When looked at in the context of the Bank of England’s inflation target, it offers a potential pressure point. If realised, this may rekindle policy hawkishness—especially if CPI data the following day rebuffs recent softness. Retail traders and futures positioning should be alert post-announcement, as any surprise deviation—particularly with earnings or inflation—tends to be met with re-pricing across sterling crosses and rate-sensitive contracts.
On Wednesday, U.S. retail sales could subtly sway interest rate expectations tied to the Federal Reserve’s next move. A 1.4% print suggests healthy activity, though the composition will be scrutinised. Core retail sales at 0.4%, if met or exceeded, adds credence to household strength despite sticky inflation. However, Fed futures may not fully respond until Chair Powell speaks in Chicago. Historically, we’ve seen markets react more to tone than to content in similar settings, especially when prior Fed signals have been ambiguous.
Meanwhile, Canada could see an active session around its inflation report and the Bank of Canada decision. With monthly price growth expected at 0.7%, inflation still hovers well above the 2% mark, despite a general downward shift. This places Macklem and colleagues in a difficult position, especially with wage growth and employment data suggesting tight labour conditions. If the BoC resists cutting rates this week, citing inflation uncertainty, we expect short-term yields to rally alongside CAD. That would catch out any mispriced dovish bets in swaps or front-end future contracts.
Come Thursday, attention will naturally shift south and east. A solid 40K employment gain in Australia may revive speculation over RBA policy path, particularly if full-time hires outpace part-time additions by a wide margin—historically a reliable prompt for market repricing in the rates space. New Zealand’s CPI the same day adds another inflation data point to interpret, although a 0.7% increase isn’t likely to disrupt current Reserve Bank signals unless it misses by a very wide margin.
The ECB’s expected quarter-point cut is widely priced in. What’s more relevant is how Lagarde and the Governing Council frame upcoming decisions. The notion that rates may settle near 1.75% by year-end implies two more reductions—which markets are already cautiously positioned for. However, if the ECB highlights recent inflation moderation amid trade friction concerns, particularly over US-EU tariff talks, then the euro and bund yields should react accordingly. We have typically seen implied volatility rise around these decisions, though realised moves have been more modest—suggesting some degree of complacency in straddle pricing ahead of the meeting.
As the week unfolds, it’s not about broad themes but about meticulous shifts: a tenth here in CPI, a thousand there in job claims, another comment from Powell for good measure. Each one narrows or widens pricing windows for future policy, offering ample material for those of us in derivatives to react—not with big swings but with sharp pivots. As ever, the details matter.
