FX Weekly: Thin Liquidity Before Data Deluge as RBNZ, Australia CPI and US Core PCE Take Center Stage
The week opens quietly for currencies, but mid-week brings a dense macro calendar that could jolt FX volatility: Australia’s monthly CPI, the Reserve Bank of New Zealand’s final policy decision of the year, Japan’s inflation prints, and a heavy US slate culminating in core PCE. Thanksgiving-thinned liquidity later in the week may amplify moves around key releases.
Market Highlights – Tuesday: US PPI, retail sales, pending home sales, Richmond Fed index, and Conference Board consumer confidence – Wednesday: Australia monthly CPI, RBNZ policy decision, Japan BoJ core CPI, US jobless claims, core PCE, personal income and spending – Thursday: US markets closed for Thanksgiving – Friday: Japan Tokyo core CPI
Quiet Start Before a Mid-Week Macro Sprint Monday lacks market-moving data, encouraging range-bound trading and light positioning. The calendar accelerates from Tuesday, with risk appetite likely to ebb and flow on US consumer data and inflation signals into the holiday period, when liquidity typically fades and price action gets noisier.
United States: Spending Resilient, Confidence Softens Recent US retail activity has surprised to the upside. August sales rose 0.6% month-on-month, led by e-commerce, with broad-based gains across restaurants, auto dealers, and sporting goods, according to Wells Fargo. After inflation, real sales increased a milder 0.2%, but the consumption impulse remains firmer than feared in the face of higher prices and a softer labor backdrop.
Momentum likely cooled in September to around a 0.4% gain as inflation and slower wage growth squeezed households. Auto sales weakened to the softest level since August 2024, likely dragging the aggregate. Even so, that pace would align with last year’s monthly average and does not signal a sharp deterioration heading into holiday spending.
Confidence, however, is wobbling. The consensus for the Conference Board consumer confidence index is 93.4, down from 94.6—its lowest since April, when new tariffs were introduced. Only 27.8% of respondents report jobs are “plentiful,” the weakest since 2017 outside the pandemic period, and a rising share expect incomes to decline over the next six months (12.5% vs. 11.7% prior). While the latest nonfarm payrolls did not show a major labor market breakdown, household financial stress indicators remain elevated. Any stabilization in sentiment may depend on reduced policy uncertainty after the federal government shutdown risk faded.
Australia: Monthly CPI Is Now the Primary Gauge Australia’s monthly CPI has become the Bureau of Statistics’ official inflation measure, pulling more focus to both monthly and annual dynamics. Westpac expects a modest 0.1% month-on-month rise in October. Because a –0.3% print from October 2024 drops out of the annual calculation, the year-on-year rate could lift from 3.5% to roughly 3.9%.
Seasonals typically soften October inflation, but the seasonally adjusted figure around 0.5% implies a firmer underlying backdrop relative to last year—helped by a smaller decline in electricity prices, stronger housing-related costs, gentler easing in rents, and an uptick in holiday travel and accommodation. AUD crosses may react asymmetrically if the monthly gain comes in firmer than expected, given the RBA’s emphasis on sticky services inflation and the trajectory of inflation expectations.
New Zealand: RBNZ Poised to Ease Again, Split Vote Risk At its final meeting of the year, the RBNZ is widely expected by some analysts to cut the Official Cash Rate by 25 basis points to 2.25%, following October’s larger 50 bp reduction. The central bank moved forcefully last month amid sluggish growth and rising slack. Third-quarter labor data reinforced the cooling narrative: unemployment rose to 5.3%, wage growth lost momentum, and employment fell 0.6% year-on-year. While inflation surprised on the upside, many see the lift as temporary.
Westpac anticipates a downward adjustment of roughly 30–35 bps to the projected OCR track, bringing the forecast trough to around 2.20% in early 2026. The main uncertainties for the Committee are the near-term growth pulse, inflation’s persistence, and how firmly expectations remain anchored. A split vote is possible, with debate likely focused on the pace of easing—25 bps versus another 50 bps. NZD could be sensitive to any guidance on the terminal rate and the Bank’s assessment of slack versus inflation stickiness.
Japan: Tokyo CPI to Test Disinflation Path Consensus looks for Tokyo core CPI to ease slightly to 2.7% year-on-year from 2.8%, following broad corporate price adjustments during the autumn repricing period. Nationwide inflation has also surprised to the upside in recent prints, but core inflation is expected to drift closer to 2.5% into year-end, supported by firm wage gains.
Policy remains nuanced. Markets still pencil in the Bank of Japan’s next rate hike in January 2026, though a move as early as December 2025 is possible. Fiscal policy is also in focus, including temporary fuel tax relief and support to curb energy bills, a FY2025 supplementary budget, and the FY2026 budget bill. Rising tensions with China add a monitoring bias toward inbound tourism and supply-chain resilience—key variables for growth and the yen’s fundamental backdrop.
Thanksgiving Liquidity and FX Positioning With US markets closed Thursday, liquidity will thin notably, potentially accentuating moves around Wednesday’s core PCE, income/spending data, and the RBNZ outcome. Traders will watch: – USD dynamics versus risk-sensitive currencies if US consumption holds up while confidence softens – AUD’s reaction to monthly CPI, particularly services components and housing costs – NZD on policy path signaling and any split-vote narrative – USD/JPY around inflation prints and any shift in Japan rate expectations
Yield dynamics at the front end and evolving inflation expectations will guide broad dollar direction. Cross-asset risk appetite could swing on whether consumption resilience offsets sentiment erosion.
Q&A Q: Which FX pairs are most exposed this week? A: AUD/USD on Australia CPI, NZD/USD on the RBNZ rate path and projections, and USD/JPY on Japan’s inflation trajectory and BOJ expectations.
Q: How could Thanksgiving affect trading conditions? A: Liquidity typically drops, widening bid-ask spreads and amplifying moves. Data surprises around Wednesday’s US core PCE and the RBNZ decision can produce outsized FX volatility.
Q: What would constitute a hawkish surprise in Australia’s CPI? A: A stronger-than-expected monthly print led by sticky services and housing costs, reinforcing upside risks to inflation expectations and nudging markets toward tighter RBA policy bias.
Q: What’s the key swing factor for the US dollar? A: The balance between resilient real spending and weakening consumer confidence. If core PCE remains firm alongside steady income growth, front-end yields could support the dollar despite softer sentiment.
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