Key Macro Events In The Coming Week

With the world engaged in open currency warfare, the only thing that matters are the assorted drivers that push various global currencies higher and lower. Here are the key macro/FX-related catalysts in the week ahead.

2012 Q4 GDP has been weak in G3 and indeed Europe more broadly, (however it has generally surprised to the upside in Asia), consequently, the momentum of business sentiment will be key to watch. The Euro area flash PMI, German Ifo and the Philadelphia Fed survey are released this week (the China flash PMI will be released on Feb 25). The consensus expects a further small rise in the Euro area services and manufacturing readings. The week also brings a batch of central bank commentary, where the focus will be on references to currency strength; these include the RBA minutes followed by testimony, a speech by RBNZ governor Wheeler, Bank of Thailand policy decision and Bank of England minutes. The Federal Reserve will release the minutes from the last meeting and they may contain important clues on the bias of the Committee with respect to how long it expects the current QE program to last. Additionally, the Committee may have discussed the potential merits of outcome-based guidance for balance sheet policy, which may be reflected in the minutes.

Monday 18 February

  • Singapore Exports (Jan): Exports rose by 0.5%yoy, less than the 3.0%yoy expected by the Bloomberg consensus.
  • Thailand GDP (Q4 2012): GDP grew by 3.6%qoq, higher than the 0.5%qoq expected by the Bloomberg consensus. The very strong year-on-year print of 18.9% is influenced the flood-related weakness of Q4 2011.
  • Euro area current account (Dec): Last reading was a record surplus of EUR14.8bn in seasonally adjusted terms.

Tuesday 19 February

  • Australia: RBA Minutes: The Minutes may give some important context around whether a rate cut was seriously entertained. Even so, the information content in these Minutes is somewhat limited – given that they pre-date the far more detailed annunciation of RBA views presented in last Friday’s quarterly Statement on Monetary Policy.
  • Malaysia current account balance (Q4): The previous reading was MYR9.5bn, or only 4% of GDP. Malaysia's smallest surplus in 10 years.
  • Sweden CPI (Jan): Bloomberg consensus expects a reading of 0%yoy, up from -0.1%yoy previously.

Wednesday 20 February

  • Japan Trade balance (Jan): Another huge trade deficit is expected in January as Abe's export-promotinh policies fail to gain any traction.
  • New Zealand: RBNZ Governor Wheeler speaks: The topic of the speech is reportedly the NZD and it will reiterate that the RBNZ believes the NZD is overvalued and would prefer it to be lower. The main question is what else will be said?
  • Thailand Monetary policy meeting: Rates are expected to remain on hold at 2.75%.
  • Malaysia CPI (Jan): Inflation is expected to remain at 1.2%yoy by Bloomberg consensus.
  • Malaysia GDP (Q4): GDP is expected to expand by 5.5%yoy after 5.2% previously by Bloomberg consensus.
  • Germany CPI (Jan): Bloomberg consensus expects a reading of 1.7%yoy
  • France CPI (Jan): Bloomberg consensus expects a reading of 1.4%yoy
  • UK: Bank of England Minutes
  • US PPI (Jan): (GS +0.1%, consensus +0.4%, last -0.3%); core PPI for January (GS +0.1%, consensus +0.2%, last +0.1%). Pipeline inflationary pressures remain very subdued, with core PPI prices for finished goods rising at a modest 0.9% annual rate over the past three months.
  • US FOMC Minutes: The January FOMC meeting was relatively uneventful, with no policy changes announced. However, the meeting minutes may contain important clues on the bias of the Committee with respect to how long it expects the current QE program to last. Additionally, the Committee may have discussed the potential merits of outcome-based guidance for balance sheet policy, which may be reflected in the minutes.

Thursday 21 February

  • Euro area flash PMIs: The Bloomberg Consensus expects a rise to 48.5 from 47.9 for the manufacturing PMI and to 49.0 from 48.6 for the services reading.
  • US CPI (Jan): GS +0.1%, consensus +0.1%, last 0.0%; core CPI for January GS +0.2%, consensus +0.2%, last +0.1%. Core CPI prices likely rose a soft 0.2% (+0.16% unrounded), consistent with an only modest underlying rate of inflation. Headline prices probably increased a smaller 0.1%, as retail gasoline prices -- an important driver of month-to-month changes in headline inflation -- declined on a seasonally adjusted basis in January. Retail gasoline prices have since risen sharply in February.
  • US Philadelphia Fed: Consensus +1, last -5.8. In light of the solid gain in the ISM manufacturing index in January and the sharp improvement in the February Empire manufacturing survey, consensus expects another bounce.

Friday 21 February

  • Australia: RBA Parliamentary Testimony (Feb): This RBA semi-annual parliamentary testimony comes at a very interesting juncture, and it will be a highly market-sensitive event given that it is the first public presentation by Governor Stevens since 12 December. As is typically the case, the initial prepared remarks should stick to the script published in the recent Statement on Monetary Policy. However, with several hours of subsequent Q&A, there is then plenty of scope for the Governor to provide more colour on the RBA’s forecasts and the related risks, including currency related.
  • German Ifo (Feb): Consensus expects a rise to 104.9 from 104.2.
  • Canada CPI (Jan): Consumer price index (Jan). Consensus: +0.2% MoM, +0.7% YoY. Prior -0.6% (+0.8% YoY). Core consumer price index (Jan), 8:30am. Consensus: +0.2% MoM, +1.1% YoY. Prior: -0.6% (+1.1% YoY).
  • Canada Retail sales (Dec): Retail sales (Dec). Consensus: -0.4%MoM. Prior: +0.2%. Retail sales ex autos (Dec), 8:30am. Consensus: +0.1% MoM. Prior: -0.3%.

Summarizing the above in tabular format courtesy of SocGen:

And the weekly narrative, from the same French bank:


Kicking off with the February ZEW survey on Tuesday, this week will see the release of a string of sentiment indicators. We expect the German ZEW, euro area PMIs and German IFO to all post some further improvement on the back of continued easing in financial stress. Euro strength, however, may have been a headwind. Overall we expect improvements this month to be less than the previous month. The French INSEE survey is seen flat, however, after the decline last month reflecting still lacklustre demand.

MARKET ISSUES: Economic data are set to take a backseat to the Italian elections this week. The release of the EU Commission’s new set of economic forecast on 22 February should nonetheless attract some interest. Points of particular interest will be the strength of the forecasted recovery and developments on the cyclically adjusted budget deficits. Note, this will mark the first release in a new forecast schedule of three releases per annum (as opposed to two, with two interim updates).


Presidents’ Day Monday means a shorter week focusing on housing and inflation data. We expect the NAHB housing sentiment indicator to hit a 7-year high in February and look for the housing data (January housing starts, building permits and existing home sales) to generally be in line with our central scenario of a housing recovery. January CPI is set to post its first monthly gain since October on the back of higher food and non-energy service costs. The February Markit PMI indicators should also point to recovery, forecast at 57 after 55.8 previously. While the risk that QE could ultimately trigger inflation remains a debate in the market, there is clearly no sign hereof in actual inflation data and nor do we see any for the foreseeable future.

MARKET ISSUES: We do not expect the minutes of the 29-30 January FOMC (Wednesday) to give grounds for a shift in monetary policy expectations, but just when the Fed will slow the pace of QE is very much at the heart of the market debate as recovery gains traction.


It is still too early to expect the recent yen decline to show up in hard trade data in a significant way, but January trade data should benefit from a recovery in exports to China. As highlighted above, we see further yen depreciation ahead and this should prove a support for the trade data over time. Importantly, we note that for Japan’s policy stimulus to result in a sustainable recovery, wage gains are ultimately needed, which would erode some of the competitiveness gains that a weaker currency can offer.

MARKET ISSUES: Focus is on the yen, and while we expect to hear less speak on the topic, we expect Japan to pursue the type of policy expansion that will see the yen at USD/JPY 100 by year-end.


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