With China offline celebrating its New Year, and potentially mobilizing forces in (not so) secret, and not much on the global event docket, the upcoming G20 Finance Ministers meeting in Moscow at the end of the week will be the key event for FX markets, which these days define every other aspect of risk. It should surprise nobody the last couple of weeks have seen increased attention on exchange rates and the frequent use of the “currency war” label by policymakers in many countries. No news announcements are expected at the BoJ meeting on Thursday, following the formal announcement of a 2% inflation target and an open-ended asset purchase program.
On the data side, US retail sales on Wednesday will provide an important signal about the strength of the US consumer following the largest tax increase in decades. Although January auto and same store sales data was reasonably solid, new taxes will soon begin to weigh on spending. Also on Wednesday, Japan Q4 GDP will be released. On Thursday, Q4 GDP for France, Germany, Italy and the Euro area will be released. While Q4 contraction is assured, the key question mark is whether German can rebound in Q1 and avoid a full blown recession as opposed to a "brief, technical" one, as the New Normal economic term goes.
Key macro events in the coming week:
Monday 11th February
- Czech Republic CPI: Consensus: +2.1%, Previous: +2.4%.
- Also interesting: US Federal Reserve Vice Chair Yellen speaks on US labor recovery. The speech could shed light on which labor market indicators the Fed will be watching in addition to its 6.5% unemployment threshold.
Tuesday 12 February
- Indonesia Central Bank Meeting: Consensus: 5.75%, Previous: 5.75%.
- UK CPI: Previous: +2.7% yoy.
Wednesday 13 February
- Sweden Central Bank Meeting: Consensus 1.0%, Previous 1.0%.
- South Korea Central Bank Meeting: Consensus: 2.75%, Previous: 2.75%.
- US Retail Sales: Consensus +0.1%, Previous +0.5%.
- Japan Q4 GDP: Previous: -3.5%.
- Also interesting: Bank of England Inflation Report.
Thursday 14 February
- Japan Central Bank Meeting: no change in the discount rate or open-ended Asset Purchase Program.
- France Q4 GDP: Consensus: -0.2%, Previous: +0.1% qoq.
- Germany Q4 GDP: Consensus: -0.5%, Previous: +0.2% qoq.
- Italy Q4 GDP: Consensus: -0.6%, Previous: -0.2% qoq.
- Euro area Q4 GDP: GS: -0.2% qoq, Previous: -0.1% qoq.
- Czech Republic Q4 GDP: Consensus: -1.7% yoy, Previous: -0.2% qoq, -0.3% yoy.
Friday 15 February
- US February Consumer Sentiment: Consensus 74.8, Previous 73.8.
- UK Retail Sales ex autos: Previous: -0.3% mom.
- G20 Finance Ministers Meeting starts in Moscow: The statement and main events are scheduled for Saturday 16 February
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And while the US may be boring, things in Europe are starting to heat up, in advance of the Italian elections in precisely two weeks:
- 9 February: Italian opinion polls embargoed. From 9 February opinion polls cannot be published.
- 11-12 February: Eurogroup/ECOFIN meetings. Latest meetings of the 17 euro area and 27 EU finance ministers. On the agenda will be the Annual Growth Survey conclusions. This is the exercise in which the Commission sets out the priorities for member states to follow in order to achieve growth. The AGS is part of the new ‘European Semester’, the integrated policy coordination framework. The AGS priorities for 2013 are: reducing national debts without harming growth; restoring normal lending to the economy; promoting growth and competitiveness; tackling unemployment and the social consequences of the crisis; modernising public administration.
- 12 February: Draghi to meet Spanish lawmakers.
- 12 February: Italy auction. Bills.
- 12 February: Spain auction. Bills.
- 13 February: (prelim) EMU Industrial production (Dec ’12).
- 13 February: Italy auction. Bonds.
- 14 February: Flash estimate of Q4 GDP. Eurostat will release its flash estimate for euro area GDP growth on the same day the majority of EMU members release their own estimates. We forecast euro area GDP to contract 0.4% qoq.
- 14 February: EU to proposal Financial Transaction Tax for 11 member states.
- 14 February: G20 deputy finance ministers and central bank governors meeting.
- 15-16 February: G20 finance ministers and central bank governors meeting.
- 17 February. Presidential election, Cyprus. Cyprus will hold its presidential election, and with the president holding executive power as head of government, this could play a role in the agreement on financial assistance for the country. With outgoing president, Demetris Christofias, expressing opposition to privatisation of state-owned enterprises that could be required under the terms of the bailout, it has been reported that finalisation the deal may have to wait until after the election. The consistent leader in the opinion polls is Nicos Anastasiades, the leader of the centre-right Democratic Rally party. He has publicly committed to implementing the terms of a bailout.
- 19 February: Rajoy to speak to Spanish parliament on economic and fiscal outlook.
- 19 February: Spain auction. Bills.
- 21 February: Spain auction. Bonds.
- 22 February: European Commission to release macro forecast update.
- 24 February. Presidential election, second round, Cyprus (tbc). If no candidate achieves more than 50% of the vote in the first round on 17 February, a run-off election between the top two candidates will be held on 24 February.
- 24-25 February: Italian elections from 7.00 am (UK time) on 24 February to 2.00pm (UK time) on 25 February. According to Bloomberg the first exit polls will be released shortly after 2.00pm UK time (9.00am in New York) on 25 February.
- 25 February: Italy auction. Bonds.
- 26 February: Italy auction. Bills.
- 27 February: 3Y LTRO prepayment window. Euro area banks that drew down the second 3Y LTRO liquidity in February 2012 will have the option to start prepaying the money. The ECB will publish weekly statistics on the total prepaid and the number of banks making the prepayments. Banks will inform the ECB in advance.
- 27 February: Italy auction. Bonds.
- 27 February: (prelim) EMU Business climate indicator for the Euro area (Feb ’13)
- By end February: Greek tax reform/tranche payment. EUR34.3bn of the EUR49.1bn instalment was paid to Greece in December. The remaining EUR14.8bn will be disbursed in Q1. Of this, EUR7.2bn covered bank recapitalisation and resolution costs and is due in January. The rest, to finance deficits, depend on ‘milestones’ being reached. In February, the milestone is an update Greece’s MTFS (Medium Term Fiscal Strategy), including setting binding 3-year spending ceilings on components of government spending.
Sources: GS and DB