Key Takeaways
- The U.S. will see significant inflation data, including the producer price index and the consumer price index.
- Retail sales may indicate solid consumer spending, a key component of economic growth.
- Although the dollar showed initial momentum, analysts believe much of the positive news has already been priced.
This week is shaping up to be crucial for the U.S. economy, as several key indicators are set to provide fresh perspectives on inflation, consumer spending, and manufacturing activity.
With reports on producer and consumer price indexes, retail sales, and crude oil inventories on the docket, the data will offer a clearer view of the economic landscape at a time when the Federal Reserve is closely evaluating its policy choices.
U.S. Data
The week of Jan. 13-17 will bring key update s on the U.S. economy. On Tuesday, Jan. 14, the December producer price index is expected to show stable inflation at the producer level, with a forecasted 0.4% increase.
Inflation trends will come into sharper focus on Wednesday, Jan. 15. Analysts expect December’s core consumer price index to rise 0.2% month-over-month, while the annual CPI may hit 2.9%, signaling stronger inflationary pressures.
Crude oil inventories are also expected to decline by 959,000 barrels, potentially reflecting higher energy demand or reduced production.
Consumer spending will take center stage on Jan. 16. Core retail sales for December are projected to grow by 0.5%, while overall retail sales are forecasted to rise by 0.6%.
Additionally, manufacturing activity in the Philadelphia region could show signs of improvement, with the Fed Manufacturing Index expected to climb to -7.0, up from -16.4.
Impact on USD
Last week’s stronger-than-expected U.S. employment report reinforced the “American exceptionalism” narrative, driving the dollar to new highs against most G10 currencies.
Bannockburn Global Forex analysts suggest this week’s data could further support the dollar’s strength.
“Headline CPI and PPI figures may remain firm, while retail sales and industrial production are expected to show sequential improvement,” they noted.
However, analysts cautioned that the dollar’s initial momentum has waned, indicating much of the news may already be priced in. “There is no clear signal that a major dollar high has been reached,” they added.
Other Main Indicators
In the U.K., the pound suffered its second consecutive weekly decline of over 1%. Since the late third quarter of 2024, it has only gained in three of the past 14 weeks.
While year-over-year CPI may remain stable at around 2.6%, core inflation and services data could soften.
However, real sector data might offer some relief, potentially including a November GDP increase after declines in September and October.
In Asia, Beijing will ease pressure on the yuan by reducing liquidity in Hong Kong through a large bill sale, signaling ongoing efforts to stabilize its currency.
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