UPCOMING EVENTS:
- Tuesday: Japan CPI, US Durable Goods Orders, US Consumer Confidence.
- Wednesday: Australia Monthly CPI, RBNZ Policy Decision, US Q4 GDP 2nd Estimate.
- Thursday: Japan Industrial Production and Retail Sales, Australia Retail Sales, Switzerland Q4 GDP, Canada GDP, US PCE, US Jobless Claims.
- Friday: Japan Unemployment Rate, Chinese PMIs, Switzerland Retail Sales, Eurozone CPI and Unemployment Rate, US ISM Manufacturing PMI.
Tuesday
The Japanese Core CPI Y/Y is expected at 1.8% vs. 2.3% prior while there’s no consensus on the other measures although the prior Headline CPI Y/Y printed at 2.6% and the Core-Core CPI Y/Y came at 3.7%. The Tokyo CPI, which is seen as a leading indicator for national inflation, surprised recently falling much more than expected with almost all the measures dropping below the BoJ’s 2% target. Even if the BoJ decides to exit the NIRP, it looks like it’s going to be just a one and done.
The US Consumer Confidence has been rising in the past couple of months. The present situation index increased substantially the last time, which might have been a hint for the strong January NFP report released a week later. In fact, compared to the University of Michigan Consumer Sentiment, which shows more how the consumers see their personal finances, the Consumer Confidence shows how the consumers see the labour market. The consensus sees the index remaining unchanged at 114.8 in February.
Wednesday
The Australian Monthly CPI Y/Y is expected at 3.5% vs. 3.4% prior. The RBA focuses more on the quarterly CPI readings, but the monthly indicator is timelier and can be a guide for the trend, especially at turning points. The Core measures will be more important but overall, this report is unlikely to change much for the central bank.
The RBNZ is expected to keep the OCR unchanged at 5.50%. There is a very slight chance of a hike with the ANZ bank recently forecasting the central bank to raise rates to 6.00%. The data though doesn’t call for such a move at the moment with the last GDP reading surprisingly showing a strong contraction and the disinflationary trend remaining intact. The unemployment rate has also been rising steadily, so there’s no real indication for a rate hike.
Thursday
The US PCE Y/Y is expected at 2.4% vs. 2.6% prior, while the M/M measure is seen at 0.3% vs. 0.2% prior. The Core PCE Y/Y is expected at 2.8% vs. 2.9% prior, while the M/M reading is seen at 0.4% vs. 0.2% prior. Forecasters can reliably estimate the PCE once the CPI and PPI are out, so the market already knows what to expect. Therefore, we are unlikely to see big reactions unless the data surprises on either side.
The US Jobless Claims continue to be one of the most important releases every week as it’s a timelier indicator on the state of the labour market. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around cycle highs. This week the consensus sees Initial Claims at 210K vs. 201K prior, while there’s no consensus for Continuing Claims at the time of writing although the last week’s data showed a decrease to 1862K vs. 1889K prior.
Friday
The Eurozone CPI Y/Y is expected at 2.5% vs. 2.8% prior, while the Core Y/Y measure is seen at 2.9% vs. 3.3% prior. The Core 3-month and 6-month annualised rates are already below the ECB’s 2% target, but the central bank is adamant on its patience stance and some members, including President Lagarde, stated that they want to see the Q1 2024 wage data before considering a rate cut. The market is fully pricing a 25 bps rate cut in June and despite the ECB’s message, the market will likely price back in an April cut if the data misses expectations.
The US ISM Manufacturing PMI is expected at 49.5 vs. 49.1 prior. The expectations are skewed to the upside as the S&P Global Manufacturing PMI showed another increase in February to 51.5 vs. 50.7 in the prior month. The generally commentary was upbeat as the sector is experiencing a rebound from the recessionary phase in the last 2 years.
