The economic calendar tends to be fairly sparse in the second week of the month. However, the focus does turn back to inflation once more,. . The US CPI will be the highlight, but we are also looking out for inflation data from China and several countries in Latin America. The European Central Bank (ECB) gives an important monetary policy update.
- North America – US CPI and Michigan Sentiment in addition to Canadian unemployment
- Europe & Asia – The ECB dominates the week, but also watch for China CPI
- LatAm – Inflation for Chile, Mexico and Brazil
North American data:
- US Trade Balance – Goods traded (Tuesday 8th March, 1330GMT) The trade deficit is expected to increase to -$82.0bn in January (from -$80.7bn in December).
- US JOLTS jobs (Wednesday 9th March, 1330GMT) Openings are expected to drop slightly to 10.8m (from 10.93m in December) but the Quit rate is also expected to drop to 4.2m (from 4.3m).
- US CPI (Thursday 10th March, 1330GMT) US inflation is expected to increase to +7.8% on headline CPI (from 7.5% in January) and to 6.4% on core CPI (from 6.0%)
- Canada Unemployment (Friday 11th March, 1330GMT) Unemployment is expected to drop to 6.3% in February (from 6.5%0
- Michigan Sentiment - prelim (Tuesday 8th March, 1500GMT) Sentiment is expected to fall slightly to 62.0 in March (from 62.8 in February)
US CPI inflation is the big focus on the economic calendar stateside this week. Inflation reached 7.5% in January on a headline CPI basis. This was the highest level since 1982. Consensus expects this rise to continue again in February, to 7.8% at the headline level and 6.4% on core CPI. This or any upside surprises would add more pressure on the FOMC to tighten faster and increase calls for a 50bps rate increase in March.
Michigan Sentiment has been in decline since the middle of 2021 and the consensus is looking for this to continue on Friday. A fall to 62.0 is expected to be driven by further declines for both the Current Conditions (to 68.0) and Expectations (to 59.0) components.
- USD will be trading primarily on the outlook for safe havens this week on the Russian invasion of Ukraine.
- However, expect volatility around the CPI data, with any upside surprises likely to cause another jump higher in USD.
- CAD will react to the unemployment data on Thursday.
Europe & Asia:
- Eurozone GDP – Q4 final (Tuesday 8th March, 1000GMT) Forecasts are looking for no revision at +0.3% QoQ.
- Japan GDP – Q4 final (Tuesday 8th March, 2350GMT) Consensus is looking for a slight upward revision in the final reading to +1.4% QoQ (from 1.3% previously)
- China CPI (Wednesday 9th March, 0130GMT) Inflation is expected to increase slightly in February to +1.0% (from +0.9%)
- ECB monetary policy (Thursday 10th March, 1245GMT) The ECB is expected to keep rates unchanged with the main refi rate at 0.0% and the deposit rate of -0.50%.
- UK GDP – MoM January (Friday 11th March, 0700GMT) Monthly GDP is expected to be positive in January at +0.3% (after -0.2% in December)
- UK Trade Balance (Friday 11th March, 0700GMT) The deficit is expected to increase to -£3.7bn in January (after a deficit of -£2.3bn in December)
- UK Industrial Production (Friday 11th March, 0700GMT) Production is expected to improve to +2.4% YoY in January (up from +0.4% YoY in December)
The European Central Bank’s monetary policy decision will not be easy. Rates will all be kept at current levels (0.0% for the main refinancing rate, and -0.50% for the deposit rate). However, with inflation accelerating higher on the one hand and the Ukrainian war on the other, the ECB is stuck between a rock and a hard place.
Soaring energy prices in Europe cannot be controlled by ECB monetary policy, but the minutes from the previous meeting of the Governing Council show growing numbers of voices itching to start the normalization of policy. The uncertainty of the Ukrainian war will be excuse enough to be cautious, but the divisions within the ECB are growing. For now, though the divergence in ECB monetary policy and that of the central banks of other major currencies is driving the EUR lower.
- EUR will be highly reactive to the ECB press conference on Thursday
- GBP will be volatile on Friday morning with a clutch of economic data. Positive surprises to the GDP data would be supportive for GBP.
- Chile CPI (Tuesday 8th March, 1100GMT) Inflation is expected to increase to 8.6% in February (from 7.7% in January)
- Mexico inflation (Wednesday 9th March, 1200GMT) The rate is expected to be 7.0% in February (following 7.1% in January).
- Brazil Industrial Production (Wednesday 9th March, 1200GMT). Production is expected to be positive at +2.0% YoY in January (-5.0% in December)
- Brazil Retail Sales (Thursday 10th March, 1200GMT) Sales are expected to improve slightly in January to -2.5% on a year on year basis (-2.9% in December)
- Brazil IPCA inflation (Friday 11th March, 1200GMT) Inflation is expected to increase to +10.79% in February (up from 10.38% in January)
Inflation is once more key throughout Lat Am this week, with data from Chile, Mexico and Brazil. Inflationary pressures seem to be mounting once more in Chile and Brazil. This will add further pressure back on the central banks to react with further tightening of monetary policy. Although Mexican inflation is forecast to remain relatively steady, there will be an upside risk to this view.
- CLP, MXN and BRL will all see elevated volatility off respective inflation data for Chile, Mexico and Brazil this week