This Week, Inflation Runs the Show

Last week’s volatility might’ve calmed, but the macro storm isn’t over.

We’re heading into a data-packed week, where inflation reports from Canada, the U.K., and the U.S. are lining up to decide where currencies swing next.

If you’ve been trading the majors lately especially USD, GBP, and CAD, this week could redefine short-term trends across pairs like USD/CAD, GBP/USD, and EUR/USD.

This one could set the tone for USD/CAD all week.

Markets expect inflation to stay flat at 3.0% y/y, while core prices hover around 0.3% m/m. A softer read would build the case for a BoC pause, possibly extending CAD weakness that’s already visible on the charts.

But here’s the twist, oil prices have started showing signs of life again, and that could cushion the loonie. If CPI surprises higher, it may spark a short-lived CAD rebound before global risk sentiment pulls it back down.

The Bank of England is under pressure to prove it still has control over inflation.

Forecasts sit at 4.0% y/y, slightly higher than before, but traders are already betting the BOE’s tightening cycle is basically done.

Any upside surprise could lift GBP/USD short term, but I’ll be watching how quickly that fades, especially if U.S. CPI (on Friday) prints hotter. Volatility on pound pairs tends to spike midweek, so I’ll be extra careful around GBP/JPY and EUR/GBP.

This is the big one.

The Fed may be leaning dovish lately, but another hot inflation print could change the tone fast. Headline CPI is expected at 0.4% m/m, and if it holds, it’ll reinforce the “sticky inflation” story that’s been haunting the Fed all year.

Pair that with the PMI data due the same day, both services and manufacturing and you get a perfect setup for a late-week USD volatility spike across all majors.

Last week’s gold surge and yen recovery proved one thing traders are getting defensive.

This week’s inflation reports could easily reset those moves. Personally, I’m watching USD/CAD for a CPI-driven fakeout, GBP/USD for midweek overreaction, and EUR/USD for Friday’s whiplash.

Volatility is looking to be sharp this week, but this time it’s data-driven, not headlines.