The Week Ahead – US CPI Report, the UK Spring Budget, and the ECB

On the Macro

It’s another busy week ahead on the economic calendar, with the key US stats likely to drive Fed policy expectations. The ECB is also in the spotlight.

For the Dollar:

Following mixed signals and economic indicators from last week, the US CPI Report will draw interest on Tuesday. Sticky February numbers could drive bets of a 50-basis point interest rate hike in March and further hawkish moves going into the summer.

On Wednesday, US wholesale inflation and retail sales figures will also influence ahead of consumer sentiment numbers on Friday.

However, there are no FOMC member speeches to consider. The Fed entered the blackout period on Sunday.

For the EUR:

It’s a busier week but another significant week for the EUR.

Euro area industrial production figures will draw interest on Wednesday. While the numbers will move the dial, they should not force the ECB to rethink its near-term policy moves.

However, finalized euro area member states and Eurozone inflation figures could play a hand this week. Investors are looking beyond March, with recent ECB member chatter suggesting more hawkish moves post-March.

With inflation in the spotlight, the ECB will deliver its March monetary policy decision on Thursday. A 50-basis point interest rate hike would shift the market focus to ECB President Lagarde and the press conference. Post-March chatter will likely be the focal point.

For the Pound:

It is a relatively busy week ahead for the pound.

UK wage growth and unemployment figures will be in the spotlight on Tuesday. Barring an unexpected surge in claimant counts, we expect the wage growth figures to garner more interest.

However, the Spring Budget also needs consideration on Wednesday. The Tory Party is not out of the woods yet. The details will further influence market sentiment towards Rishi Sunak and Chancellor Jeremy Hunt. Beyond tax and spending plans, the Office for Budget Responsibility (OBR) will release its updated economic and fiscal forecasts.

For the Loonie:

It is a quiet week ahead on the economic calendar for the Loonie. Housing start figures for February will draw interest. However, barring a sharp fall from January, the numbers should have a muted impact on the Loonie, leaving economic indicators from China and crude oil prices to influence.

Out of Asia

For the Aussie Dollar:

It is another busy week ahead for the Aussie Dollar.

Business and consumer confidence numbers will be in focus on Tuesday. While business confidence numbers will draw interest, consumer confidence figures should have more influence.

However, February employment numbers on Thursday will likely be the key drivers. Weaker consumer confidence figures and a fall in employment would test AUD/USD support.

From the RBA, the RBA Bulletin will also need consideration on Thursday.

For the Kiwi Dollar:

For the Kiwi Dollar, Q4 GDP numbers will be in focus on Thursday. The RBNZ has taken a more dovish stance on monetary policy. Weak numbers would support an RBNZ pause over the nearer term.

Earlier this month, RBNZ Governor Orr spoke of the dangers of lifting rates too quickly and going too far.

For the Japanese Yen:

It is a quieter week ahead for the Japanese Yen. On Thursday, trade data and machinery orders will be in focus. Another increase in machinery orders and a narrowing in the trade deficit should deliver Yen support.

From the Bank of Japan, monetary policy meeting minutes on Wednesday should not influence the Yen. The minutes are from the January meeting.

Out of China

It is another big week ahead for the global markets. Following the better-than-expected private sector PMI numbers for February, investor focus will turn to unemployment, industrial production, and retail sales figures.

The stats would have to beat expectations to support the commodity currencies and the appetite for riskier assets. Economists forecast a bounce back in retail sales, a pickup in industrial production, and a steady unemployment rate.

Geo-Politics

The war in Ukraine and China-Russia relations will remain the focal point. However, we could see investors respond to the renewal of diplomatic ties between Saudi Arabia and Iran, which raised eyebrows.