The German ZEW report is the highlight of the European session. Expectations are for a decline to 27.3 from 34.7. However, this report is not expected to change the European Central Bank’s current approach.

Focus On Canadian And US Data

In North America, the spotlight shifts to Canadian and US data. The Canadian Trimmed Mean CPI Year-over-Year is expected to stay steady at 3.0%, which is at the top of the Bank of Canada’s target range. Even with stable inflation, attention is turning to the weakening job market, as unemployment rises to 7.1% from 6.9%. Rate cuts are predicted, with one 25 basis point cut anticipated soon and another by the end of the year. Today’s data may not heavily influence these forecasts, but a negative surprise could sway expectations for future cuts. In the US, Retail Sales Month-over-Month growth is predicted to slow to 0.2%, down from 0.5%. Meanwhile, ex-Autos is expected to rise to 0.4% from 0.3%, and the Retail Sales control group is projected at 0.4%, down from 0.5%. While this data can impact markets, its reliability is often questioned because of volatility. Overall, traders will focus on upcoming FOMC decisions and US Jobless Claims. For Europe, we do not anticipate the German ZEW economic sentiment report to create much impact. The European Central Bank has already indicated its focus on controlling core inflation, which remains high. Therefore, any short-term trades based on this sentiment data are likely to face challenges.

Implications For The Canadian Dollar

Today, the Canadian inflation data is more intriguing, as the market waits to see if it stays at 3.0%. Inflation has been rising since it hit bottom at 2.5% in December 2024, but the Bank of Canada is mainly worried about the job market. With unemployment rising from 6.2% in January 2025 to 7.1% last month, the central bank has a strong reason to cut rates. For traders, this sets a clear scene for the Canadian dollar. Since the market anticipates two rate cuts by the year’s end, if inflation is lower today, traders might bet on a third cut, making put options on CAD appealing. Conversely, a surprise increase in inflation could temporarily raise the currency’s value, but it likely won’t change the Bank of Canada’s overall dovish stance. In the US, Retail Sales data is likely to show a slight slowdown in consumer spending. This report is known for its volatility and is overshadowed by the Federal Reserve’s interest rate decision tomorrow. Consumer spending has eased in 2025, so a weaker report won’t be shocking. Any immediate reaction in S&P 500 futures or the US dollar from the retail sales figures will probably be short-lived. The real market mover will be tomorrow’s FOMC statement, which will set the market direction for the weeks ahead. Traders will overlook today’s data noise and prepare for potential volatility with the Fed’s announcement. Create your live VT Markets account and start trading now.

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