Outlook for the market in the week of February 9-13

The upcoming week in the forex market is expected to be influenced by key economic events and data releases, shaping the market outlook for traders. The beginning of the week will see a focus on the Japanese yen following the lower house elections in Japan. Prime Minister Sanae Takaichi’s decisive victory in the general election is projected to give her a strong mandate to address cost-of-living pressures and pursue her national security agenda, which has led to the strengthening of the JPY at the start of the week.

Attention will then shift to the U.S. on Tuesday with the release of retail sales data that was delayed due to the U.S. government shutdown. Wednesday will bring significant U.S. labor market data, including average hourly earnings, nonfarm payrolls, and the unemployment rate. These releases, originally scheduled for the previous week, are expected to show an increase in average hourly earnings, nonfarm payrolls, and a steady unemployment rate.

Thursday will see the U.K. publishing monthly and quarterly GDP figures, while the U.S. releases weekly unemployment claims. The highlight of Friday will be the U.S. inflation data, with expectations for retail sales to improve following a positive trend seen in November, though recent indicators suggest a softening in spending momentum in December. Analysts anticipate a growth in retail sales driven by more favorable household tax policies.

In the U.K., GDP data is expected to show only moderate growth in the last quarter of the year, with a dovish tone from the Bank of England’s recent meeting leading to expectations of possible rate cuts in the near future. In the U.S., inflation data is forecasted to show firm core inflation, with various factors contributing to price increases. However, there are also factors like slower food price increases and lower fuel costs that could lead to a decline in headline inflation.

Despite some private-sector measures indicating a cooling in recent months, there are risks of persistence in official data. Rising import prices and tariff costs absorbed by U.S. importers could still exert upward pressure on consumer prices. Companies might offset some of these increases through efficiency gains, but further transmission to end prices cannot be ruled out. Easing energy costs and slower growth in housing rents are expected to help contain overall inflation pressures.

Overall, the upcoming economic events and data releases are likely to shape market sentiment and influence trading decisions in the week ahead. Traders will closely monitor these developments to gauge market movements and potential opportunities in the forex market.