Monday starts quietly, with no major economic releases scheduled for the FX market. However, traders will keep an eye on Bank of Canada's business outlook survey for insights into business sentiment.
On Tuesday, attention will turn to Canada’s inflation data, which will be the key highlight of the day and Wednesday the focus will shift to the U.K.'s CPI figures.
Thursday brings Canada’s retail sales data and U.S. existing home sales, both of which will provide updates on consumer activity and housing market conditions.
The week concludes on Friday with a busy data calendar featuring manufacturing and services PMI releases for Australia, the U.K., the eurozone, and the U.S. In addition, the U.S. will publish its inflation data, revised University of Michigan consumer sentiment and UoM inflation expectations, as well as the new home sales figures.
The BoC's business outlook survey is expected to show a modest improvement in sentiment following recent uncertainty surrounding trade conditions. Some signs of stabilization have already emerged, with the CFIB small business confidence index edging back above neutral in September.
Retail sales in Canada are also expected to rebound by 1.0% after a 0.8% decline previously. The data will be closely monitored for indications of whether household spending remains resilient. RBC’s credit card data suggests steady momentum in September, although overall consumer spending growth in Q3 appears to have moderated compared with Q2.
The consensus for Canada's CPI m/m is –0.1%, unchanged from the prior month. The median CPI y/y is expected to ease slightly from 3.1% to 3.0%, while the trimmed CPI y/y is likely to remain steady at 3.0%. The common CPI y/y, however, is projected to edge higher from 2.5% to 2.6%.
This week’s inflation report will be closely watched for clues on the BoC’s next policy decisions. Last month’s data showed that inflation pressures eased more than expected, and combined with ongoing softness in the labor market, prompted the BoC to cut rates by 25 bps at its latest meeting.
The Bank has indicated that future rate cuts remain on the table and will be guided by incoming data. Markets are currently pricing in another 25 bps cut this quarter. A sharper-than-expected decline in inflation, paired with a weak business outlook survey due today, could accelerate the timing of further easing.
Although the latest labor market data surprised to the upside, with the unemployment rate falling from 7.2% to 7.1%, one stronger report is unlikely to deter the BoC from its gradual path toward additional rate cuts.
In the U.K., the consensus for CPI y/y is for an increase from 3.8% to 4.0%, while core CPI y/y is expected to edge higher from 3.6% to 3.7%.
According to analysts at ING, the rise in inflation is largely driven by base effects from the sharp drop in petrol prices in September last year. However, this is likely to mark the peak for headline inflation, even if a substantial decline is not yet expected. Services inflation is also anticipated to show modest improvement, potentially coming in below the BoE’s projections.
Inflationary pressures remain a concern in the U.K., particularly with food prices still elevated. Markets currently expect the BoE to deliver another rate cut at its February meeting next year, as policymakers balance easing inflation against lingering cost-of-living pressures.
In the U.S., the consensus for existing home sales is 4.06M, up slightly from the prior 4.00M. Sales remain under pressure as high mortgage rates, elevated home prices, and rising insurance costs continue to weigh on affordability.
However, analysts at Wells Fargo note that conditions have begun to ease modestly, with mortgage rates falling nearly 48 bps since mid-July and housing supply gradually improving. While affordability remains constrained, these developments could help support a mild recovery in sales.
The October Eurozone PMI will offer insight into whether the region can sustain the modest growth seen in September. The composite PMI rose to a 16-month high of 51.2 last month, though the headline figure masked a mixed picture: services remained in expansion while manufacturing slipped back into contraction. Forecasts point to little change in October, reinforcing concerns about the durability of growth momentum amid ongoing weakness in industrial output and retail activity.
From a monetary policy perspective, the ECB is unlikely to cut rates at its next meeting but analysts anticipate another reduction in December. The timing will depend on the euro’s strength and the pace of disinflation, with a lingering risk that any further easing could be delayed into 2026 if conditions fail to align.
U.S. inflation data will finally be released this week, just ahead of next week’s FOMC meeting. Consensus is for core CPI to rise 0.3% m/m, unchanged from the prior reading, while the headline CPI is also expected to increase 0.4% m/m.
Although the U.S. government shutdown is still ongoing and has disrupted several other data releases, the inflation figures should remain unaffected since most data collection was completed beforehand. Risks to data quality may only emerge if the shutdown extends further into subsequent releases.
Inflation, however, remains stubbornly high. August CPI accelerated to a 2.9% annual pace, with core inflation running hotter at 3.1% amid rising goods prices. Wells Fargo analysts expect little relief in September, projecting headline CPI to advance 0.4% on the month which would lift the annual rate to 3.1%, its highest level in more than a year.
Core CPI is forecast to climb 0.3% for the third consecutive month, keeping the year-on-year rate steady at 3.1%. Such results would underscore the limited progress in cooling inflation ahead of the Fed’s next policy decision.
