Key Events: USD Remains in Spotlight With CPI Due
- By Macro Hive
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Key Events
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In the US, these are the main data points:
- CPI, PPI – Tuesday, Thursday. Consensus implies inflation stasis, which is consistent with the limited actual tariff increases so far and growth dynamism that has not been weakened, yet, by the surge in policy uncertainty. Consensus forecast is for core CPI at 0.3% MoM and 3.2% YoY. With the PPI, we will get an estimate of February core PCE, which the Cleveland Fed sees at 22bp MoM.
- University of Michigan consumer confidence – Friday. The release is likely to show continued weakening, e.g., headline below 65, and confirm the rise in inflation expectations since November.
In the Eurozone and UK, it is a quiet week. The main events will be:
- UK January GDP – Friday. Expectations are for a bounce in January MoM, on the back of services. We still see the UK economic outlook as bleak.
- Final French, Spanish and German February CPI – we will be looking at the wage-intensive services component for confirmation that the Q1 trend remains too hot to justify the ECB cutting to below neutral.
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- China February CPI – Sunday. Due to the LNY mismatch, we will see sharp decline in the CPI. In previous similar mismatches, February CPI declined on average 1.2%, with the largest contribution from food, tourism, and households service.
- China February PPI – Sunday. Slight increase in local commodity prices indicates an improvement in the PPI.
- China February Total Social Financing – Sunday-Saturday. Accelerating government bond issuance (RMB 1.8 tn) indicates another high number of total social financing. However, falling bank bill rates suggests low long-term credit demand.
Central Banks in Action
- The Fed’s pre-meeting blackout starts on 8 March.
- ECB speakers include Holzmann (who abstained from the ECB cut), Villeroy, Nagel, Rehn, de Guindos, Lane, Panetta, Villeroy, Simkus, Lagarde and Escriva. Expect some clarification on the path ahead, and for the hawks to provide louder pushback on the need for more cuts. We think the ECB may not need to cut below 2.25% this year.
Markets to Watch
- USD remains in the spotlight with CPI due. We returned short as Germany unleashed its fiscal power. Room remains for shorts to build, against EUR.
- NOK/SEK likely sees intra-week volatility with both currencies due an inflation update. However, we believe the oil and equity outlook matters more for timing a long.
- European rates have sold off a lot this week, in line with our longstanding view. In the near term, though, we may see pullback, especially if there are any headlines that suggest total spend may be lower at the EU or German level. Nevertheless, we believe the higher EUR rates trend has room to run.
- UK yields were dragged up by Europe’s sell-off. We see best value fading this move in the UK short end particularly.
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