BOC and RBA meetings, followed by preliminary inflation data from EU, Caixin PMI data from China and employment data from US (NFP) and Canada will highlight the week ahead.
USD
Consumer confidence index for February came in at 130.7 for a small increase from 130.4 in January. Consumers should continue to contribute to spending and growth in H1 of 2020. New home sales surged to 764k from upwardly revised 708k the previous month for the highest level in almost 13 years. The situation in the market causes demand for bonds which in turn pushes their yield lower. The dramatic change in the short end of the yield curve now implies that markets now fully price in a rate cut at the March meeting.
Second reading of Q4 GDP came in at 2.1% annualized as expected. Personal spending came in at 1.7%, down from 1.8% preliminary. Business investment came in at -2.3% vs -1.5% preliminary for a third consecutive quarter of falling investments. Net exports were revised up and propped GDP to stay at the same level as preliminary reported. Preliminary durable goods orders in January came in at -0.2% m/m vs -1.4% m/m as expected with prior month’s reading being revised up to 2.9% m/m. Core durable goods rebounded to 1.1% m/m from -0.8% m/m the previous month which was revised up to -0.5% m/m. A strong start of the year for business investment, but the effects of Boeing and coronavirus will certainly dampen the numbers in the coming months. Personal income came in at 0.6% m/m up from 0.2% m/m the previous month while personal spending came in at 0.2% m/m, down from 0.3% m/m the previous month.
This week we will have ISM PMI data and trade balance data. NFP on Friday is expected to come around 175k, the unemployment rate is expected to tick up to 3.7% while average hourly earnings are expected to stay at 0.2%.
Important news for USD:
Monday:
ISM Manufacturing PMI
Wednesday:
ADP Nonfarm Employment
ISM Non-Manufacturing PMI
Friday:
Nonfarm Payrolls
Unemployment Rate
Average Hourly Earnings
Trade Balance
EUR
Ifo business climate index in February came in at 96.1 vs 95.3 as expected. Both expectations and current assessment categories beat the expectations. According to Ifo economists, the coronavirus outbreak did not affect the German economy. The problem with the survey and this statement is that it was conducted before the virus took the lives of four people in Italy. Later on, an Ifo economist stated that the development of the coronavirus epidemic is not yet fully reflected in the survey. German’s Q4 GDP has been confirmed flat for the quarter and only 0.3% y/y. Exports were down, businesses investment was cut and consumption stagnated. February sentiment data showed that EU’s economy does not appear to be threatened by coronavirus. Consumer confidence improved to -6.6 with other indicators also showing improvement, most notably the economic sentiment indicator pushing up to 103.5.
The Venice Carnival has been cancelled, football games in northern Italy have been postponed and schools have been closed. The number of reported deaths is 11 while number of people affected with virus is climbing toward 4-digit number. New cases showed up in Spain, Germany, Denmark, UK and Austria as well.
This week we will have final PMI February data, preliminary February inflation data, the unemployment rate and consumption data for January.
Important news for EUR:
Monday:
Markit Manufacturing PMI (EU, Germany, France)
Tuesday:
CPI
Unemployment Rate
Wednesday:
Markit Services PMI (EU, Germany, France)
Markit Composite PMI (EU, Germany, France)
Retail Sales
GBP
Official talks regarding future trade relationship between UK and EU are set to start on Tuesday. UK has affirmed in their negotiating mandate that they are looking for Canada, Japan-style deals and that they are willing to trade on no-deal basis with EU if the talks fail to produce results. The government stated their willingness to quit talks by June and turn their attention on preparations for no-deal scenario if no progress is made on the deal. GBP has weakened on this news.
This week we will have final PMI data and start of EU/UK talks regarding future trade relationship, so headlines will dominate the movements in the GBP.
Important news for GBP:
Monday:
Markit Manufacturing PMI
Wednesday:
Markit Services PMI
Markit Composite PMI
AUD
Private capital expenditure in Q4 missed the expectations badly coming in at -2.8% q/q vs 0.5% q/q as expected. The decline was mainly due to a drop in construction activity and this will be a huge drag on Q4 GDP number. AUDUSD fell to new lows. Lowest levels in 11 years have been reached on the back of worrying reports about coronavirus impact.
This week we will have Q4 GDP, which may surprise to the downside due to weak capex data, trade balance and consumption data from Australia. RBA will hold their meeting. Expectations are for the rate cut in April and no changes in March. Caixin PMI and trade balance data will be published from China.
Important news for AUD:
Monday:
Caixin Manufacturing PMI (China)
Tuesday:
RBA Interest Rate Decision
RBA Rate Statement
Wednesday:
GDP
Caixin Services PMI (China)
Caixin Composite PMI (China)
Thursday:
Trade Balance
Friday:
Retail Sales
Saturday:
Trade Balance (China)
NZD
Retail sales for Q4 came in at 0.7% q/q vs 0.8% q/q as expected, down from 1.6% q/q the previous quarter. Core retail sales also missed expectations coming in at 0.5% q/q vs 0.9% q/q as expected and much weaker than 1.8% q/q the previous quarter. Yearly figure dropped to 3.3% y/y vs 4.5% y/y the previous quarter. Department stores along with fuel sales were the main drag while pharmaceuticals showed an increase.
Trade balance for the first month of the year came in at -NZD349m vs -NZD549m as expected. Both exports and imports were positive and beat the expectations which lead to lower than expected trade deficit. After several months of improvement in business confidence the reading showed a step back and came in at -19.4 vs -13.2 the previous month. NZDUSD pair has dropped under 0.63 level.
This week we will have bi-monthly GDT auction.
Important news for NZD:
Tuesday:
GDT Price Index
CAD
Wholesale trade in December came in at 0.9% m/m vs 0.4% m/m as expected and rebounded from -1.2% m/m the previous month. The automotive sector was the main drag. A drop in oil prices due to slowing of global demand pushed CAD down against major pairs. WTICrude was trading below psychologically important $50/barrel during the week, falling even bellow $45/barrel for a brief period. Q4 GDP came in as expected at 0.3% q/q and 1.3% annualized.
This week we will have employment and trade balance data and BOC rate decision. Chances of a rate cut have increased. Markets are now pricing almost 30% chance of a rate cut.
Important news for CAD:
Wednesday:
BOC Interest Rate Decision
BOC Rate Statement
Friday:
Employment Change
Unemployment Rate
Trade Balance
JPY
Tokyo area CPI in February continued to move in the opposite direction from the BOJ target. Headline number came in at 0.4% y/y vs 0.5% y/y as expected and down from 0.6% y/y the previous month. Ex-fresh food category came in at 0.5% y/y vs 0.7% y/y the previous month while ex-fresh food, energy category came in at 0.7% y/y vs 0.9% y/y the previous month. The unemployment rate in January jumped to 2.4% from 2.2% the previous month. Retail sales finally bounced back and showed a strong reading, coming in at 0.6% m/m vs -0.1% m/m as expected and -0.4% y/y vs -1.3% y/y as expected. Preliminary industrial production numbers were also better than expected coming in at 0.8% m/m vs 0.2% m/m.
This week we will have final PMI data as well as data on household spending and wages.
Important news for JPY:
Monday:
Markit Manufacturing PMI
Wednesday:
Markit Services PMI
Markit Composite PMI
Friday:
Household Spending
Labour Cash Earnings
CHF
SNB’s Maechler reiterated willingness to act in the market if the need arises. Swissy has been gaining strength due to its safe haven status, pushing EURCHF down to 1.06, so it is reasonable to believe that they will act to preserve that level and ease the CHF strength. The US treasury has SNB on the watch list for potential currency manipulation. January retail sales came in at -0.1% m/m but the previous month’s reading was revised up to 0.8% m/m.
This week we will have Q4 GDP and inflation data.
Important news for CHF:
Tuesday:
GDP
Wednesday:
CPI
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Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.
