Goldman recaps the last and looks at the coming week:
It was a very data heavy week but in the end the important macro releases provided little new information as the majority came in close to expectations. That was certainly true for the US ISM and payrolls. Business surveys in the rest of the world were at the margin a touch weaker as well but coming from very elevated levels. Inflation numbers were generally the same concern as before but the surprises were mixed with, for example, higher inflation than expected in the Eurozone but lower than expected in Korea.
As always, the post-payrolls week will be relatively light on macro data releases but of course we are heading for a number of central bank meetings against a background of a gradually deteriorating inflation-growth trade-off. Key will be the ECB on Thursday, though a 25bp hike is fully anticipated after the unwaveringly hawkish comments from a number of ECB officials. At the press conference we do not expect to hear an even more hawkish tone from Trichet. There is a lot of Fed speak with Bernanke and Yellen on schedule, among others, as well as the latest FOMC minutes. In last week’s key Fed speech Bill Dudley continued to sound quite dovish highlighting ample spare capacity in the economy still.
If the ECB and key Fed officials follow their usual stance (hawkish and relatively dovish, respectively), then we may see EUR/$ finally take out important technical resistance in the 1.43 area. We continue to recommend long EUR/$ positions with a target of 1.50. Broader USD weakness may also feed into more CNY strength. Our real broad USD TWI closed the week on another historical record low.
With Brent crude finishing the week close to cycle highs as well, at 118.70, there is certainly more downside risk for the USD but also growing upside risk for inflation. We will continue to look closely at oil price dynamics.
Finally, in the upcoming week there will be quite a bit of UK activity and inflation data, with non-manufacturing and construction PMIs, labour market data, PPI. At the BoE meeting we expect the MPC to stay on hold, though we expect a hike in May.
Bernanke Speech: Overnight from Monday to Tuesday Chairman Bernanke is scheduled to speak at the Atlanta Fed Conference (7:15pm local time in Atlanta). Fed Presidents Lockhart and Evans will also make speeches.
Turkey Consumer Prices (Mar): Given extremely strong demand growth in Turkey and rising inflationary pressures, CPI will be interesting. We expect a rise to 4.6% yoy from 4.2% in the February. Consensus is looking for 4.4%.
Also Interesting: UK Construction PMI (Mar).
RBA cash rate: We and consensus expect the RBA to keep rates on hold at 4.75%.
Poland central bank meeting: We and consensus expect a 25bp hike to 4.00%.
Global Services PMI/non-manufacturing ISM: In general, we and consensus expect very little change in tertiary sector PMIs globally. Given relatively high readings already and the slight disappointment from the manufacturing PMIs last week, the risks could be skewed slightly to the downside. We expect the US non-manufacturing ISM at 59.0 (consensus 59.5, last 59.7).
FOMC minutes (March 15 meeting): The more upbeat assessment of current economic conditions in the March 15 FOMC statement should also show through in the minutes released this week. The minutes will also be noteworthy for their discussion of the increase in oil prices, which mostly took place between the end of February and the first week of March. Recent discord in public statements between Fed officials suggests members saw different implications for the outlook. Finally, the release may contain a few hints about technical matters, such as whether or not to slow Treasury purchases as QE approaches its end, and how the FOMC plans to structure post-meeting press conferences.
Fed Speakers: Kocherlakota, Lockhart and Plosser are scheduled to speak publicly.
Also Interesting: Philippines CPI (Mar).
UK labour market data (Mar): Given the debate on fiscal tightening in the UK and the uncertainty about the MPC meeting on the following day, the latest snapshot of the UK labour market will likely be important.
UK industrial production (Feb): Given the proximity to the MPC meeting, this will be important as well. GS expects manufacturing output to rise by +0.6% mom, in line with consensus.
German manufacturing orders (Feb): We expect a rise by +0.3% mom (consensus +0.5% mom).
Also Interesting: Spain Industrial Production (Feb), Swiss CPI, Taiwan CPI.
BOJ Meeting: No change in the policy rate is expected. The market will likely look out for additional responses to the earthquake.
UK MPC meeting: Consensus expects unchanged rates. We agree but still think the MPC will hike rates at the May meeting, though it remains a close call and the incoming data until then will be very important.
ECB meeting: We and consensus expect a hike by 25bp to 1.25%. The degree of hawkishness by President Trichet at the following press conference will be key, though we don’t expect anything that deviates notably from what is currently priced in rates markets.
German industrial production (Feb): GS expects a moderate rise of +0.2% mom, below consensus at +0.5% mom.
US jobless claims: Consensus expects a tiny drop to 385k from 388k.
Also Interesting: Norway industrial production (Feb, GS +0.7% mom).
Swiss labour market data (Mar): Given the strong Swiss Franc, it will be interesting to see the economy resist well. We expect a further decline in the unemployment rate to 3.3% from 3.4%.
UK PPI (Mar): More UK inflation data to help assess the likely trajectory of monetary policy. We expect core PPI to rise by 0.4% mom (consensus +0.3%).
Chile CPI (Mar): We expect a significant sequential acceleration in Chilean inflation from +0.2% mom to +0.85% mom. Consensus expects +0.8% mom.
Also Interesting: Sweden industrial production (Feb), Canada labour market data, Eurozone and EU Finance Ministers meet in Budapest.
Fed speech: Fed Vice Chairman Yellen is scheduled to speak to Yale economists on the crisis