The European session highlighted the UK Retail Sales report, which exceeded expectations but didn’t change interest rate predictions, as the Bank of England remains focused on inflation. In Asia, the Bank of Japan’s Ueda is set to hold a press conference at 06:30 am GMT. After two committee members supported a rate hike, if Ueda downplays this, the JPY may lose its recent gains.

Retail Sales Impact in the American Session

In the American session, the Canadian Retail Sales report is coming out, forecasted at -0.8% for July, down from 1.5% in June. The ex-Autos reading is expected at -0.7%, compared to 1.9% previously. This is unlikely to sway the Bank of Canada’s decisions, suggesting mild market responses. Later, there’s a call scheduled between Trump and Xi at 09:00 am ET/13:00 pm GMT, their first since June. They’ll discuss trade, TikTok, and technology. However, few agreements are expected, likely echoing recent US-China discussions in Madrid. In the UK, strong retail sales data is not likely to change the Bank of England’s approach. With inflation staying above 2.5% until mid-2025, the BoE is prioritizing price stability over consumer spending. Therefore, traders may overlook any immediate strength in the pound from good retail numbers since the overall interest rate outlook remains the same. We’re closely monitoring the Bank of Japan’s messaging, recalling the dissent that led to their significant policy change in 2024. With Japan’s core inflation above the 2% target for over two years, if Governor Ueda hints at patience regarding further hikes, the yen may weaken again. This backdrop keeps options betting on high USD/JPY volatility, like straddles, viable ahead of BoJ announcements.

Canadian Economic Outlook

In Canada, the market anticipates a slowing economy, and weak retail sales will strengthen this view. This data is likely to confirm the Bank of Canada’s careful approach, particularly as household debt-to-income ratios remain high at 178%. Traders might interpret poor data as a cue to take positions that would benefit from a lower Canadian dollar, such as buying puts. High-level US-China calls are now seen through a long-term competitive lens. As past talks often led to limited agreements, we expect current discussions on trade and technology to keep the current tensions. For traders, this signifies high headline risk, making it prudent to consider buying VIX call options or other volatility products to hedge against any sharp, unexpected statements. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now