Upcoming Week: Focus on Inflation Figures for the Fed, ECB, and BoJ

US Dollar Outlook:

Thursday's US CPI Report will be closely watched by investors, and stronger-than-expected inflation data could reduce expectations of a Q1 Fed rate cut, especially following the positive US Jobs Report in December. Rising wage growth and a tight labor market may boost disposable income, potentially driving consumer spending and demand-driven inflation, prompting the Fed to maintain current interest rates for an extended period to curb spending and control inflation.

EUR Focus:

Early in the week, attention will be on the German economy, with a focus on German factory orders and trade data on Monday. Weakening economic indicators, including PMIs, have raised concerns about a recession, and further declines in factory orders or unfavorable trade conditions could lead to speculation of a Q1 2024 ECB rate cut. Later in the week, finalized inflation figures from Spain and France may influence ECB decisions, along with commentary from ECB members.

Pound Analysis:

The Pound's week begins with a look at UK mortgage rates, which have started to decline in anticipation of BoE rate cuts in 2024. Lower mortgage rates could boost disposable income, potentially fueling consumer spending and demand-driven inflation. This might lead the BoE to maintain interest rates longer or even raise them if banks perceive no rate cuts. Data such as UK retail sales, GDP, manufacturing, and industrial production will also be significant factors.

Loonie Market:

Building permits and trade data on Tuesday will impact the Loonie, with trade data carrying more weight. Weak trade conditions may reflect global demand weakness, affecting commodity currencies. Geopolitical factors and crude oil prices should also be considered.

Australian Dollar Insights:

Building approvals and retail sales will influence the Australian Dollar's short-term trends on Tuesday. Retail sales are crucial, as a sharp increase could prompt the RBA to consider another rate hike. Trade data later in the week will be important for the Aussie, given its trade-intensive economy.

Kiwi Dollar Outlook:

The Kiwi Dollar will be influenced by geopolitics, China's economic calendar, and stimulus news from Beijing, as there are no New Zealand-specific economic indicators. 

Japanese Yen Analysis:

A shortened but pivotal week for the Japanese Yen, with household spending and inflation figures on Tuesday potentially impacting expectations regarding a BoJ pivot away from negative rates. A pickup in wage growth may signal increased spending and demand-driven inflation, while weak household spending and softer inflation could delay any move away from ultra-loose policy by the BoJ.

China's Economic Indicators:

China's new loans on Wednesday will be noted, with a decrease possibly indicating economic weakness, although some leniency may be given due to the PBoC's liquidity injection in December. Later in the week, consumer and producer price inflation figures and trade data will influence market sentiment, especially regarding the effectiveness of stimulus measures and global and domestic demand.