The upcoming week is filled with economic events, starting with the U.S. empire state manufacturing index on Monday. On Tuesday, the U.K. will release employment data, and Canada will focus on inflation data, with the U.S. publishing retail sales figures.
Wednesday brings the U.K. inflation data and the anticipated monetary policy announcements from the BoC and FOMC. Thursday features New Zealand’s GDP and Australia’s employment figures, alongside the BoE meeting, U.S. unemployment claims, and the Philly Fed manufacturing index. Friday concludes with the BoJ announcement and retail sales data from the U.K. and Canada.
The US Retail Sales Forecast
In the U.S., retail sales m/m consensus is 0.2%, with core sales at 0.4%. Retail sales have shown resilience due to strong demand in various sectors, though spending on home improvement and restaurants remains soft. Analysts forecast August sales growth slowing to 0.4%, with consumption expected to decelerate by year-end due to various economic headwinds.
The BoC may hold rates steady despite expectations of a cut. Canada’s Q2 economy contracted by 1.6%, but Q3 indicators appear more stable. Inflation data, showing headline CPI possibly rising to 2.1%, will influence the BoC’s decision.
The Fed is expected to resume rate cuts, targeting 4.00%–4.25%. Despite steady inflation and employment, the Fed might rethink long-term growth and employment strategies, with data-dependent decisions.
New Zealand’s GDP q/q forecast is -0.3%, largely due to technical factors. Growth momentum has eased, pointing to a nuanced trend. In Australia, August employment is forecast to increase by 15k, with the unemployment rate slightly rising to 4.3%.
The BoE is predicted to maintain rates, focusing on future policy signals while paying close attention to labour and inflation data. Inflation is expected to show food prices rising over 5%, possibly easing in services.
The Bank Of Japan Decision
Lastly, the BoJ is set to keep rates steady at 0.50%. Political changes have delayed projected rate hikes until early 2026, with the economic backdrop supporting higher rates amid modest price growth.
This week’s Federal Reserve meeting on Wednesday is the main event, with a rate cut widely priced into the market. After the latest August jobs report showed hiring cooled slightly to 187,000 and core inflation remained persistent at 3.5%, the market has already anticipated this move. We believe derivative traders should watch for surprises in the forward-looking dot plot, as volatility in index futures could spike if the Fed signals more future cuts than currently expected.
The Bank of Canada decision is a major point of uncertainty this week, with the market split on a potential rate cut. All eyes will be on Tuesday’s inflation figures, especially after the economy officially contracted by 1.6% in the second quarter of 2025. This coin-flip scenario suggests positioning for a sharp move in the Canadian dollar either way, making options straddles on USD/CAD an interesting strategy to consider.
For the Bank of England, we expect no change in rates this Thursday, shifting the focus to forward guidance for the November meeting. Recent wage growth data holding firm near 6.0% and sticky services inflation give policymakers reason to wait. Derivative traders may find more value in longer-dated options on the GBP/USD, positioning for a potential cut later this year rather than for immediate volatility.
Attention will turn to Australian employment data on Thursday, a key indicator for the Reserve Bank of Australia’s future policy. We are watching to see if the unemployment rate rises to the expected 4.3%, as a higher-than-expected number could increase bets for a rate cut later this year. Traders should be prepared for a spike in short-term volatility in the AUD/USD pair around the time of the release.
The Bank of Japan is expected to remain on hold this Friday, largely due to recent political instability. With national inflation having eased to around 2.5% last month and the yen still weak, there is little pressure for an immediate move. This outlook implies that yen volatility may remain subdued, suggesting strategies like selling out-of-the-money options on USD/JPY could be attractive for generating income.
