There is much riding on next week’s agenda with Euro and US Dollar in the spotlight ahead of the crucial US Inflation and Retail Sales release and the ECB meeting. The Eurogroup Meeting in Brussels kicks off next week along with the UK Annual Budget Release. The economic agenda contains labour figures from the UK & Australia and US Housing Starts & Building Permits.
Have a look at the most important events of the coming days in our usual weekly publication.
Tuesday – 14 March 2023
Average Earnings Index & ILO Unemployment Rate (GBP, GMT 07:00) – The January UK Index earnings is expected to grow by 5.5% (3m/y) including bonus and 6.8% (3m/y) excluding bonus. Unemployment rate could remian unchanged at 3.7% (3m).
– CPI gains for February are expected at 0.4% for both the headline and the core in February after respective January gains of 0.5% and 0.4%. CPI gasoline prices look poised to climb 2% in February. We expect dissipating upward pressure on core prices through 2023 as disruptions from global supply chain bottlenecks and the war in Ukraine subside. As-expected February CPI figures would result in a drop in the y/y headline rise to 6.1% from 6.4% in January, versus a 40-year high of 9.1% in June. We expect the core y/y gain to slow to 5.4% from 5.6% in January, versus a 40-year high of 6.6% in September. For February PCE y/y chain price gains, we expect respective increases of 5.2% and 4.7%, versus prior 40-year and 39-year highs in 2022 of a respective 7.0% in June and 5.5% in February. We expect a sharp moderation in y/y gains for all the inflation gauges through 2023 that will trim pressure on the Fed to tighten monetary conditions. Consumer Price Index (USD, GMT 12:30)
Wednesday – 15 March 2023
UK Annual Budget Release (GBP, GMT N/A)
Retail Sales (USD, GMT 12:30) – Headline February retail sales is expected at 0.3% and 0.8% for the ex-auto index, after respective January surges of 3.0% and 2.3%. Energy-led price declines have depressed nominal sales since Q2 of 2022, though we expect a 2% February rise for the CPI gasoline index that will lift gasoline sales. Sales will face a headwind going forward from a rebounding savings rate, following last year’s drop to a 17-year low of 2.7% in June, before the ensuing climb to 4.7% in January.
Gross Domestic Product (NZD, GMT 21:45) – GDP is the economy’s most important figure. The Q4 GDP for New Zealand is expected to grow by 0.8% q/q from 2.0% q/q, with headline at 2% y/y from 6.4%, confirming a significant slowdown in the last quarter.
Thursday – 16 March 2023
Labor Data (AUD, GMT 00:00-00:30) – Employment change for February is expected to contract by -18.6K, with the unemployment rate rising at 3.9% m/m from 3.7% m/m.
Housing Starts & Building Permits (USD, GMT 12:30) – Housing starts are expected to rise 3.1% to a 1.350 mln pace in February from a 3-year low of 1.309 mln. Permits are expected to rebound to 1.370 mln from 1.339 mln in January, versus a 3-year low of 1.337 mln in December. Pending home sales bounced 8.1% in January after a 1.1% increase in December. The MBA purchase index plunged -15.1% in February to a 28-year low, after a prior climb from an 8-year low in October.
Markets have ramped up tightening expectations on both sides of the channel after hawkish comments from ECB’s Holzmann and BoE’s Mann this week. Fed Chair Powell also signaled ongoing concern over persistent inflation pressures. Official rates are expected to stay “higher for longer” than expected on both sides of the Atlantic.The ECB is set to deliver another 50 basis point rate hike next week, and the main focus will be on Lagarde’s comments on the future rate path. She might set the stage for additional hikes, though the doves will insist that data-dependency of further moves remains. A return to an early commitment to a specific rate path seems unlikely. Lagarde was already too vague for markets at the last presser. Given the obvious tensions within the Governing Council she may once again be forced to deliver a vague statement that merely confirms that rates will likely have to rise further. Reuters poll points to an ECB terminal rate of 3.75%, with three more 25 bp hikes, following next week’s 50 bp move. Money markets are predicting a 4% terminal rate and while our central scenario also remains that there will be three more 25 bp hikes, the chances of a 50 bp move in May have increased substantially since the record high core inflation number and Holzmann’s hawkish comments. Interest Rate Decision & Statement & Press Conference (EUR, GMT 13:15 & 13:45) –
Friday – 17 March 2023
Michigan Consumer Sentiment (USD, GMT 15:00) – The Michigan sentiment report is expected to confirm a headline climb to a 15-month high of 67.5 in March from a prior high of 67.0, versus an all-time low of 50.0.
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