Fed, BoE, RBA, BoJ and SNB (no less than 5 central banks) meetings, inflation from the UK and Canada, employment from Australia, preliminary PMI data from the Eurozone and the UK as well as industrial production and retail sales from China will highlight the massive week ahead of us. Caution is advised as markets will be very volatile.
USD
February CPI report saw headline number come in a tad hotter as it printed 3.2% y/y, up from 3.1% y/y in January. Core CPI continued to tick down and it printed 3.8% y/y vs 3.9% y/y in the previous month. Energy prices rose 2.3% m/m as oil prices had risen in February while gasoline prices increased by 3.8% m/m. Core services ex energy, shelter rose by 0.5% m/m vs 0.8% m/m increase in January. Core goods prices rose for the first time in three months.
Retail sales rebounded in February but by less than expected as headline number printed 0.6% m/m vs 0.8% m/m as expected. Control group was flat on the month and when taken into account a drop in January it means that consumption contribution to Q1 GDP will most likely be negative. Retail sales report was overshadowed by PPI release which saw big jump as it printed 0.6% m/m and 1.6% y/y vs 0.3% m/m and 1.1% y/y as expected. Price pressures are sticky and are not going away easily which lowered Fed’s chance of cuts and thus gave USD strength.
The yield on a 10y Treasury started the week at 4.08%, rose to 4.32% and finished the week at around 4.31%. The yield on 2y Treasury started the week at 4.48% and reached the high of 4.76%. Spread between 2y and 10y Treasuries started the week at -40bp then widened to -41bp as curve inverted further. The 2y10y is inverted for over eighteen months. FedWatchTool sees the probability of no change at March meeting at 99% while probability of a 25bp rate cut is at 1%. Probability of a May rate cut is around 6% while probability of a June rate cut is around 58%.
This week we will have FOMC meeting. Markets are pricing no chance of a rate cut and we will get new dot plot and Summary of Economic Projections. Additionally, we will get to hear Fed’s decision on potential QT taper. Incoming data has been mostly on the strong side so the Fed might deliver a hawkish message.
Important news for USD:
Wednesday:
Fed Interest Rate Decision
EUR
Final German CPI unchanged at 2.5% y/y while final French CPI reading was revised up to 3% y/y. Talks about June rate cut are growing louder as some ECB policymakers even call for two rate cuts by July. ECB will wait for wages report and then decide when their next move be and markets are pricing June as a start or rate cutting cycle.
This week we will have preliminary March PMI readings.
Important news for EUR:
Thursday:
S&P Global Manufacturing PMI (Eurozone, Germany, France)
S&P Global Services PMI (Eurozone, Germany, France)
S&P Global Composite PMI (Eurozone, Germany, France)
GBP
Employment report for the month of February saw payrolls increase by 20k after increasing by 15k in January. ILO unemployment rate for the month of January ticked up to 3.9% from 3.8% in January. There was a drop in wages as average weekly earnings rose 5.6% 3m/y vs 5.8% 3m/y the previous month and ex bonus component of earnings printed 6.1% 3m/y, down from 6.2% 3m/y in January. A slowdown in wage increases will be welcomed by the BoE which should start cutting rates in August. January GDP reading increased 0.2% m/m as expected due to services increasing 0.2% and construction sector increasing by 1.1% m/m.
This week we will have inflation data, preliminary March PMI and BoE meeting. No change to the policy rate is expected as markets are positioned for an August rate cut.
Important news for GBP:
Wednesday:
CPI
Thursday:
BoE Interest Rate Decision
S&P Global Manufacturing PMI
S&P Global Services PMI
S&P Global Composite PMI
AUD
February inflation from China saw a big jump as it printed 0.7% y/y from – 0.8% y/y in January. The report shows big jump in demand for food and services. Additionally, there were some weather issues that affected supply and thus contributed further to price increases. PPI, on the other hand, continued to decline as it printed -2.7% y/y, down from -2.5% y/y the previous month. PBOC has held 1-year MLF rate unchanged at 2.5% as was widely expected.
This week we will have employment data and RBA meeting. No change to policy is expected and many analyst see RBA staying pat for a prolonged period of time. We will also get production and consumption data from China.
Important news for AUD:
Monday:
Industrial Production (China)
Retail Sales (China)
Tuesday:
RBA Interest Rate Decision
Thursday:
Employment Change
Unemployment Rate
NZD
Electronic card retail sales, they cover around 70% of retail sales, dropped in February by 1.8% m/m after they rose 2% m/m in January. Over the year they have grown by 2.5%. The report showed declines in purchases of consumables, fuel, durables and apparel while purchases of motor vehicles increased.
This week we will get Q4 GDP data.
Important news for NZD:
Wednesday:
GDP
CAD
January manufacturing sales rebounded by 0.2% m/m from -1.1% m/m drop in December, but markets were expecting a 0.4% m/m increase. Sales were up in 11 of the 21 sub sectors, with transportation equipment and chemicals adding the most to the result. The biggest decline was seen in aerospace products and parts. Housing starts in January jumped 14% as the report printed 253.5k, up from 223.6k in December.
This week we will get inflation data.
Important news for CAD:
Tuesday:
CPI
JPY
Final Japan Q4 GDP reading saw it improve to 0.1% q/q from -0.1% q/q as preliminary reported. The revision helped Japan avoid technical recession, but expectations were for a 0.3% q/q growth. There was a big jump in non-residential investment, it grew by 2% vs 0.1% as preliminary reported, but private consumption was revised down to -0.3%. A drop in private consumption poses a concern but BoJ is focused solely on wages, so we expect them to move rates out of negative territory after the results of Shunto wage negotiations.
This week we will have a BoJ meeting and latest reports suggest that we will finally see a rate hike and end of negative interest rate policy.
Important news for JPY:
Tuesday:
BoJ Interest Rate Decision
CHF
SNB total sight deposits for the week ending March 8 came in at CHF477.4bn vs CHF478.5bn the previous week. Sight deposits go back into the well-established range after a miniscule change from week to week.
This week we will have SNB meeting. SNB is seen as the first major central bank that could cut due to inflation being below their target, but with other central banks opting for June as a start of rate cutting cycle we could see SNB deliver no change at their March meeting.
Important news for CHF:
Thursday:
SNB Interest Rate Decision
