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BoC meeting, inflation data from the US and GDP from Japan will highlight the week from the economic news standpoint but we can expect further volatility in the markets exacerbated by the Trump policies.
USD
President Trump has announced an executive order to create a Crypto Strategic Reserve which will have Bitcoin and Ethereum as main staples but will also include some of the smaller coins such as Solana and Cardano. Bitcoin has rallied to $95 000 but then the risk off mood in the markets spurred by tariffs, now 20% on imports from China, pushed it back to the levels seen before the announcement. After the NFP report Trump said that tariffs on potash from Canada will be reduced to 10% from 25% as initially intended.
Atlanta Fed GDPNow tracker has plunged further showing a decrease in growth of 2.8%. This makes it almost a 5% drop in two business days which is unthinkable for the developed economy. OPEC+ confirmed that they will reverse supply cuts and gradually increase supply from April by 138k b/d. Increased supply is pushing oil prices down.
ISM manufacturing for the month of February came in at 50.3 vs 50.8 as expected and down from 50.9 in January. Prices paid component surged to 62.4 from 54.9 the previous month while an increase to 55.8 was expected. Other important components all showed decline with employment back into contraction with a 47.6 reading. New orders component also plunged into contraction with a 48.6 print, down from 55.1 seen in January. Production index managed to stay in expansion but also declined to 50.7 from 52.5 the previous month.
February ISM services improved to 53.5 from 52.8 thus giving a brighter look of the US economy since services comprise a great majority of total economy. Business activity was almost unchanged while improvements were seen in new orders and employment indices while inventories returned into expansion. Prices paid component increased at a faster pace posing more concern regarding underlying inflation pressures. January trade balance saw a record high deficit of -$131.4bn. Imports have jumped 10% as companies are preparing for incoming tariffs.
February NFP saw headline number miss expectations as it printed 151k jobs added vs 160k as expected. The unemployment rate ticked higher to 4.1% while participation rate dropped to 62.4%. There was a big jump in underemployment, U6, which printed 8% from 7.5% in January. Wages grew by 0.3% m/m vs 0.4% m/m the previous month. Healthcare was the leader in jobs added with 52k while government added 11k jobs. Hours worked remained at 34.1 which does not show a strong economy. Additionally, we should see more layoffs in the coming months as DOGE starts delivering which will bring more weakness to the labor market.
The yield on a 10y Treasury started the week at 4.22%, rose to 4.33% and finished the week at around 4.32%. The yield on 2y Treasury started the week at 4.01% and reached the high of 4.04%. Spread between 2y and 10y Treasuries started the week at 22bp and finished the week at 33bp as curve bear steepened. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 11%, while probability of a no cut is around 89%. June is the first meeting that sees above 50% probability of a rate cut.
This week we will have inflation data expected to show further declines and headline number below 3%.
Important news for USD:
Wednesday:
CPI
EUR
Final manufacturing PMI in February was revised up to 47.6 from 47.3 as preliminary reported on the back of improvements in both German (two-year high) and French readings. New orders component is still declining but it is doing so at the slowest pace since May of 2022. The report also highlights that business confidence is above long-term average. Services were revised down to 50.6 from 50.7 due to negative revision in German reading while positive revision for French reading was not enough to make up the difference. Price pressures remain prevalent in services sector and are being transferred to the consumer which will result in higher prices. Composite was unchanged at 50.2.
Preliminary February inflation data showed headline number tick down to 2.4% y/y from 2.5% y/y in January while a 2.3% y/y print was expected. Services inflation printed 3.7% y/y, down from 3.9% y/y the previous month while food, alcohol & tobacco increased to 2.7% y/y from 2.3% y/y in January. Core inflation ticked down to 2.6% y/y as expected from 2.7% y/y the previous month.
Germany will create a new fund that is designed to spend €500bn over 10 years on infrastructure. Additionally, debt brake will be reformed so that any defense spending of more than 1% would be exempt from the debt brake. Federal government plans to implement looser fiscal rules for the local governments. Yield on 10y Bunds, German bonds, jumped after the announcement. This has led to further widening of spread between 2y Bunds and 2y Treasuries which pushed EURUSD above the 1.08 level.
President of the European Commission Ursula von dey Leyen unveiled new defense spending program named ReArm Europe. The plan will see total spending on defence increase by €800bn in efforts to reduce union’s dependency on United States. Final Q4 GDP was once again revised up and now it prints 0.2% q/q and 1.2% y/y.
ECB has delivered a widely expected 25bp rate cut and thus brought deposit facility rate to 2.5%. It was the seventh rate cut in this cutting cycle. The accompanying statement shows that disinflation process is on the track and is developing broadly as staff members expected. There was a change regarding the monetary policy as it is now seen as becoming “meaningfully less restrictive” from plain restrictive at the previous meeting. New projections see headline inflation averaging 2.3% in 2025, 1.9% in 2026 and 2% in 2027. Higher inflation projection for 2025 is due to stronger energy price dynamics. Growth projections have been revised down to 0.9% for 2025, 1.2% for 2026 and 1.3% for 2027. Reasons for downgrade are lower exports and ongoing weakness in investments as well as uncertainty around trade policy. ECB remains data dependent and will make their decisions on meeting-by-meeting basis.
GBP
February final manufacturing print was revised up to 46.9 from 46.4 as preliminary reported. Despite the increase the report shows increased level of declines in new orders and output as well as steepest job losses since the pandemic influenced months in 2020. Input costs are increasing at a faster pace and are being transferred to the consumer in the form of higher selling prices. This will pose more headaches for BoE as inflationary pressures refuse to go away. Services, similar to the EU reading, were revised down to 51 from 51.1 as preliminary reported. Business expectations are now on the decline while input prices continue to rise and that deadly combination led to yet another drop in employment index, fourth in a row. Composite was unchanged at 50.5.
AUD
Q4 GDP saw economy grow by 0.6% q/q, better than 0.5% q/q as expected and up from 0.3% q/q in Q3, as well as 1.3% y/y, also better than 1.2% y/y as expected and up from 0.8% y/y growth seen in the previous quarter.
Official Chinese PMI data for the month of February showed improvements in both sectors. Manufacturing returned to expansion with a 50.2 print vs 49.1 in January due to rebounds in output and new orders. Services rose to 50.4 from 50.2 the previous month and helped composite rise to 51.1 from 50.1 in January. Caixin manufacturing moved further into expansion as it printed 50.8 vs 50.1 the previous month. The report showed further expansion in output and new orders with input costs rising but not being transferred to consumers as output prices are falling due to discounts and promotions. Business optimism remains high. Caixin services printed 51.4, up from 51 in January as report showed growth in new orders remaining strong with employment remaining stable and price pressures easing.
In response to additional tariffs on Chinese products imposed by the US, now at 20%, China has retaliated with new tariffs on agricultural products coming in from the US. Chicken, wheat, corn and cotton will be hit by additional 15% tariff while sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products will face additional 10% tariff.
Two sessions delivered targets for GDP of “around 5%” while CPI target was reduced to 2% from 3%. Fiscal deficit was raised to 4% of GDP from 3% with ultra-long term bond issuance increased to CNY1.3tln. Looking at the increased fiscal deficit it means that government plans to provide bigger support to the economy. Monetary policy will be “moderately loose” meaning we can expect more cuts to the RRR and 7-day reverse repo. On the currency front, desire remains to “maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.” Government will be focused on boosting domestic demand.
NZD
RBNZ governor Orr resigned during the week. He stated that he is leaving as economy is in cyclical recovery with inflation in the targeted range. Deputy Hawkesby will act as governor until March 31 while Finance Minister will appoint a temporary governor on April 1. Temporary governor will be appointed for a period of 6 months and decision will be made based on recommendations from RBNZ board.
CAD
Employment report for February saw economy add only 1.1k jobs vs 20k as was expected. The unemployment rate remained at 6.6% while participation rate dropped to 65.3%, Wage rose again and printed 3.8% y/y. Composition of jobs is another concerning factor with this report as economy lost 19.7k full-time jobs while it added 20.8k part-time jobs. January trade balance surged to CAD3.97bn as export posted a record high all on the back of tariff threats.
This week we will have BoC meeting. Another 25bp rate cut is expected bringing the rate down to 2.75%.
Important news for CAD:
Wednesday:
BoC Interest Rate Decision
JPY
Final manufacturing PMI for the month of February was revised up to 49 from 48.7 as preliminary reported. The report shows that companies are facing sluggish demand both internally and externally but that companies are still keeping optimism. Input costs continue to increase which prompted companies to pass those costs onto consumers leading to increase in selling prices at a faster pace. Services were also revised up and thus moved further into expansion with a 53.7 reading, up from 53 as preliminary reported which helped lift composite to 52 from 51.1 the previous month.
Q4 capex printed a -0.2% y/y decline, thus plunging after a strong 8.1% y/y reading in the third quarter. Rengo, largest union group in Japan, stated that they are looking for average wage increase of 6.09% for 2025. Such a high increase in wages would contribute to wage price spiral and could in turn prompt BoJ to remain on a rate hiking path.
This week we will have final Q4 GDP print.
Important news for JPY:
Tuesday:
GDP
CHF
SNB total sight deposits for the week ending February 28 came in at CHF437.4bn vs CHF438.1bn the previous week. After a jump in week up to February 21 total sight deposits are once again on the decline. Headline inflation ticked down in February but not as much as expected printing 0.3% y/y vs 0.2% y/y as expected and down from 0.4% y/y in January.
