Daily Market Analysis | HotForex

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MACRO EVENTS & NEWS

FX News Today

The AUD, NZD and emerging nation currencies gained ground against the USD, JPY and other currencies, continuing to outperform as stocks in Asia built on weekly gains, posting the best winning streak of the year in many cases. AUDUSD logged a three-month high at 0.7376, and AUDJPY a one-month peak. USDJPY, meanwhile, recouped to near 114.00 from the low 113s. EURUSD consolidated in the mid-1.09s after yesterday’s short-covering rally following above-forecast data out of the Eurozone. In the stock market realm, Japan’s Nikkei closed 0.3% for the better, up by over 4% on the week, while the main Chinese indexes are set to make today the fourth consecutive daily gain. Oil prices have continued to consolidate the 30%-plus gains seen from January lows amid signs of an improving supply-demand balance. The PBoC’s cutting of its reserve requirement ratio for big commercial banks on Monday, expectations of more stimulus from the ECB at its meeting next Thursday, and encouraging data in the US this week, coupled with market-satisfyingly confident-but-cautious guidance from Fed policymakers have collectively underpinned the prevailing risk-on sentiment this week. Attention is now on today’s US payrolls report, which is expected to show a decent 190k headline gain.

Dallas Fed’s Kaplan sounded relatively dovish emphasizing patience on rate hikes and policy accommodation, especially relative to tighter global financial conditions so far this year. That said, he sees resilience in the US economy for 2016 with a 1.9% GDP forecast, once accounting for slowing global growth and tighter financial conditions. As a Texas-based policy maker he sees potential ripple effects from weakness in the energy sector, though oil inventories may begin to fall by mid-2017. He also forecasts the jobless rate falling at a slower pace this year, though a low rate is more sustainable given global overcapacity. Kaplan said that inflation as tracked by the Dallas Fed ticked up in January, which bears watching. Markets remain inert ahead of payrolls.

Yesterday’s US reports revealed disappointments across the factory goods, ISM-NMI, and claims figures that trimmed prospects for both GDP and payrolls, though the pattern of upside surprises in US data over the past week remains intact despite today’s setbacks. The productivity report tracked estimates with welcome Q4 boosts in productivity and output alongside big downward bumps in Q3 and Q4 compensation that allowed a hefty trimming in Q3 and Q4 growth for unit labor costs.

Talks between OPEC and non-OPEC oil producers are on the table potentially in the first half of April, according to a Gulf OPEC delegate, but have not been formally set just yet. The source believes the meeting would likely be held in Doha, or some other Gulf city. A production “freeze” at elevated levels was agreed between the Saudis and Russia, but a wider agreement remains to be hammered out. Oil prices continue to consolidate gains in the meantime.

Main Macro Events Today

US Employment: February nonfarm payrolls are expected to increase by 190k, with a 180k private payroll gain. Forecast risk: upward, as improving claims could provide a lift. Market risk: downward, as substantial weakness could impact the path of rate hikes. The unemployment rate is expected to hold steady at 4.9%. The workweek is expected to remain at 34.6 from January. Hourly earnings are expected to be up 0.1% which would leave a 2.5% y/y rise. Hours-worked should be up 0.1% for the month following a 0.4% increase last month.

Canada Ivey PMI: Canada’s Ivey PMI is expected to drop to 60.0 in February after jumping to 66.0 in January. The run-up in the January Ivey did not mean sentiment across Canada switched from mild pessimism in December to a level of optimism not seen since February of 2012’s 66.5 reading. Underlying not seasonally adjusted data typically sees big swings over November, December and January that are proving difficult to adjust in the seasonally adjusted series. That was likely again the case this time around.

Canada Trade: The trade deficit is projected to widen modestly to -C$0.8 bln in January (median -C$1.0 bln) from -C$0.6 bln in December. We see a 0.5% m/m gain in exports after the 3.9% surge in December. We see a 0.5% m/m gain in exports after the 3.9% surge in December. Imports are expected to rise 1.0% in January after the 1.6% bounce in December. Oil prices are a key risk, having plunged in January, which should weigh on import and export values.

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The Economic Week Ahead

Main Macro Events This Week

United States: This week’s economic calendar is as thin as it could be with only 8 releases and none of the crucial. February trade price data (Friday) headlines the slate that includes the Fed’s LMCI and consumer credit reports (today) and January wholesale trade (Wednesday), along with weekly jobless claims, the Treasury budget, and Q4 QSS (Quarterly Services Survey) figures (Thursday). Import prices are forecast dropping 0.9% on the month, with export prices off 0.5% as weakness in energy prices remains a major drag. Wholesale sales are seen falling 0.8%, with inventories dipping 0.2%. These data will help fine tune GDP forecasts. After last week’s data we’re seeing a 1.5% growth pace for Q1, from an upwardly revised 1.1% in Q4 (was 1.0%). Note that the Atlanta Fed’s GDPNow estimate was revised up to 2.2% after jobs and trade data, from 1.9% previously.

Canada: It will be a very busy week of data and events, with the focus on the Bank of Canada’s rate announcement (Wednesday). We expect no change to the current 1.00% rate setting, with Poloz maintaining the cautiously constructive outlook for domestic and global growth. The slate of economic data due this week should support the Bank of Canada’s outlook. Employment (Friday) is the data highlight of the week, with jobs expected to rise 10.0k in February after the 5.7k drop in January. The unemployment rate is seen steady at 7.2%. Housing starts (Tuesday) are projected to improve to a 175.0k unit clip in February from the 165.9k unit pace in January. Building permits (Tuesday) are expected to rise 3.0% m/m in January after the 11.3% surge in December. While capacity utilization (Thursday) is expected to fall to 81.7% in Q4 from 82.0% in Q3, with the report consistent with an economy that has ample spare capacity. The new home price index (Thursday) is anticipated to rise 0.1% m/m in January after th e 0.1% gain in December. Net worth for Q4 (Friday) will feature another rise in the ratio of net worth to disposable income. Governor Poloz provides introductory remarks (Thursday) at the Canadian Institute for Advanced Research in Ottawa.

Europe: The ECB meeting clearly will overshadow data releases this week, which include German orders and production numbers for January. German factory orders came in better than expected earlier at -0.1% against expectations of -0.5%. The previous month was also revised up to -0.2% form -0.7%. Industrial production (Tuesday) meanwhile, is expected to pick up 0.6% m/m (median same), after the -1.2% m/m contraction in the previous month, which was also impacted by the mild weather at the end of last year, which cut back energy production. French industrial production (Thursday) should show a similar pattern. The final reading of Eurozone Q4 GDP (Tuesday) is expected to be confirm growth rates of 0.3% q/q and 1.5% y/y, but is too backward looking to change the outlook. The same holds for final February inflation readings from Germany, France and Spain, which are not expected to show major revisions. The calendar also has German trade data, as well as a German bond auction. Events include a Eurogroup meeting, which will be watched for comments on the progress on the Greek bailout review. There also is a one day summit on the EU refugee crisis. We don’t expect major progress, but rather the discussions will once again show the growing rift between countries on the issue.

United Kingdom: The Brexit debate will remain the central theme, with the pound sensitive to any signs that the “Outers” are making a serious challenge to the status quo of the “Inners.” So far this hasn’t been the case. The latest FT poll tracker has 46% favouring to remain in the EU, 41% wanting to leave, and 13% still undecided. Big misses in UK PMI numbers for February last week highlighted flagging growth momentum, though sterling markets have discounted a bearish narrative that has seen BoE tightening expectations being pushed out to 2017. The calendar this week brings the BRC retail sales report for February (Tuesday), industrial production for January (Wednesday) and January trade numbers (Friday). We don’t anticipate these to be market movers. December. The trade figures should see a deficit of GBP 10.2 bln in January. BoE Governor Carney is also due to testify before Parliament (Tuesday).China: There is a lot of data from China this week. The February trade report (Tuesday) should show a narrowing in the surplus to $53.0 bln from $63.3 bln in January. February foreign direct investment (Tuesday) is seen sliding further to -3.3% y/y from -3.2% in January. February CPI (Thursday) is forecast accelerating to a 2.0% y/y pace from 1.8%, while PPI likely edged up to -5.0% y/y from -5.3%. February loan data is also due Thursday. January industrial production will be released on Saturday, and is likely to come in up 5.5% y/y from the 6.13% pace in January.

Japan: BoJ Governor Kuroda will be speaking at a Yomiuri Shimbun event ahead of next week’s (March 14, 15 policy meeting). Q4 GDP (Tuesday) is expected to be revised down to -1.5% from the preliminary -1.4%, while the January current account surplus (Tuesday) is seen narrowing to JPY 900 bln from 960.75 bln previously. February consumer confidence (Tuesday) is forecast to have dipped to 42.3 from 42.5. February bank loans and first 20-day February trade data are also due Tuesday. February PPI (Thursday) is expected to improved slightly to -2.4% y/y from -3.1% in January.

Australia: calendar is sparse this week after last week’s data barrage and the RBA meeting. The feature economic release is January housing finance (Wednesday), expected to fall 1.0% m/m following the 2.6% gain in December. ANZ job ads (today) disappointed. The actual number -1.2% was lower than anticipated after the 1.0% gain in January. RBA Deputy Governor Philip Lowe speaks (Tuesday) at the Urban Development Institute of Australia’s (UDIA) National Industry Congress in Adelaide.

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Macro Events & News

FX News Today

Fed governor Brainard noted some pick-up in inflation, in her comments on CNBC, with the core PCE rising to a 1.7% y/y pace in January. But that’s only one data point, she stressed, and she wants to see a pattern of increases moving toward the 2% target. Core inflation has also remained stubbornly low. She believes there’s reason for price pressures to build, especially if oil prices stabilize, upward pressures on the dollar abate, and the firming economy boosts demand. But she also sees troubling signs that inflation has moved lower of late, as she noted various downside risks to growth from abroad. She abstained from giving signs on the timing of a hike, but emphasized the two Fed mandates of growth and stable prices, and noted that there hasn’t been much progress on the latter. That suggests she won’t vote for a hike next week, or in the near future. He comments were consistent with prior remarks.

Fischer: the Fed would prefer not to use negative rates, he said in Q&A. The FOMC has been looking at what other countries have been doing, in terms of employing various policy tools, and he noted that negative rates have worked somewhat better than expected. Additionally, it seems in his mind it’s a moot point as he indicated the US is not that far away on inflation, and he sees price pressures picking up once oil and the dollar stabilize.

US consumer credit rose $10.5 bln in January after a revised $21.4 bln surge in December (was $21.3 bln). November’s $14.0 bln increase was nudged up to $14.1 bln. Non-revolving credit remained the leader, climbing $11.6 bln compared to the prior $15.9 bln increase (revised from $15.4 bln). Revolving credit declined $1.1 bln versus the prior $5.5 bln gain (revised from $5.8 bln). It’s the first decline for that component since February 2015.

Main Macro Events Today

Final EMU Q4 GDP: The final reading of Eurozone Q4 GDP is expected to be confirm growth rates of 0.3% q/q and 1.5% y/y, but is too backward looking to change the outlook. The focus will be on the breakdown, which is likely to show that domestic demand and consumption remain the mainstay of growth, but investment seems to be also picking up, judging by national data already released.

BoE Governor Carney Speech: Markets look forward to governor Carney’s speech in order to have clues on the banks future rates policy. We expect the BoE to stave off from hiking rates until Q4 2016 or Q1 2017. Continued disinflationary pressures along with slowing emerging market growth, together with abatement in domestic economic momentum, have been quelling BoE tightening ambitions.

BoC Rates Decision: No change is expected to the 0.50% policy rate. A better than expected Q4 GDP gain relative to bank expectations (+0.8% vs flat) along with three months of export gains through January are supportive of a repeat of the cautiously constructive growth outlook. We could see a bit more optimism creeping in, given the good news on GDP and exports, along with firming oil and commodity prices and financial markets that have stabilized/improved after a poor start to the year.

Canada Housing Starts and Permits: We expect starts, due Tuesday, to improve to a 175.0k unit rate in February (median 182.5k) after the back to back declines in December to 172.5k and January to 165.9k from 212.0k in November.

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Macro Events & News

FX News Today

Stock markets continued to decline during the Asian session. Global growth concerns are once again hitting equity markets. In Europe, the Brexit debate is hanging over the UK and in the Eurozone investors remain cautious ahead of tomorrow’s ECB meeting, after the disappointment from December. Draghi is fighting a difficult balancing act while a deposit rate cut and a tweaking of the QE program seem almost certain, the question is if he can pull a rabbit out of the hat against resistance from the conservatives at the council. US equities ended yesterday in the red as the energy sector ended down by 4.2% and the financials dropped by 1.62%. News wasn’t particularly stock market friendly with Citi down 2.4% after the CFO forecasted a 15% drop in markets revenues in Q1 and 25% dive in investment banking revenues, along with a $400 mln charge for restructuring.

Energy Action: The EIA lowered its Brent oil price forecasts, now seeing a 2016 average of $34/bbl from its prior $37 estimate, and $40/bbl in 2017, down from $50. Brent futures are currently trading at $39.88/bbl.

China bad banks need a lifeline said a NPC delegate according to an article in the WSJ (subscription), in the form of fresh funds to help the resolve rising financial risks and absorb bad assets. The so-called “bad banks” were designated in 1999 to help shoulder $200 bln in bad debts from state lenders and buy bad assets at a discount before restructuring the companies and then selling the assets at a profit. The proposal is aimed at allowing them to go public and expand their asset purchases to help mop up “zombie companies.”

Canada housing permit values fell 9.8% in January after a revised 7.7% m/m gain (was +11.3%) in December. According to Statistics Canada, the pull-back in total permit values was due to lower construction intentions for multi-family dwellings in B.C. and Ontario, along with a smaller drag from institutional buildings in Quebec and Alberta. Permit volumes slowed to a 188.4k rate in January from the 217.2k clip in December.

Main Macro Events Today

UK Industrial Production: Industrial production numbers for January are out today and expected to improve to 0.1% from -0.4% in December. Industrial Production in the UK declined 0.40 percent YoY in December, following a 0.7 percent increase in November. December decline was the first contraction in 28 months and was mainly due to a decrease in manufacturing output.

US Wholesale Trade: U.S. Wholesale Trade Preview: January wholesale trade data is out Wednesday and should reveal a 0.8% decline for sales with inventories down 0.2% (median -0.2%) for the month. This follows respective December figures of -0.3% for sales and -0.1% for inventories. Data in line with our forecast would allow the I/S ratio to tick up to 1.33 from 1.32 where it held in both December and November.

BoC Rate Decision: No change is expected to the 0.50% Bank of Canada policy rate in Wednesday’s announcement. A better than expected Q4 GDP gain relative to bank expectations (+0.8% vs flat) along with three months of export gains through January are supportive of a repeat of the cautiously constructive growth outlook. We could see a bit more optimism creeping in, given the good news on GDP and exports, along with firmer oil and commodity prices relative to January and financial markets that have stabilized/improved after a poor start to the year.

[michaellobry]

Energy Action: The EIA lowered its Brent oil price forecasts, now seeing a 2016 average of $34/bbl from its prior $37 estimate, and $40/bbl in 2017, down from $50. Brent futures are currently trading at $39.88/bbl.

I have a question about oil. I heard in one of my tutorials, when oil price goes up, then US dollar price goes down. Is this correct? Or is it, when oil price goes up, US dollar price goes up? Please explain in detail so that I can understand the full picture.

[michaellobry]

Australia: calendar is sparse this week after last week’s data barrage and the RBA meeting. The feature economic release is January housing finance (Wednesday), expected to fall 1.0% m/m following the 2.6% gain in December. ANZ job ads (today) disappointed. The actual number -1.2% was lower than anticipated after the 1.0% gain in January. RBA Deputy Governor Philip Lowe speaks (Tuesday) at the Urban Development Institute of Australia’s (UDIA) National Industry Congress in Adelaide.

“the actual number was lower than anticipated”. In one of my tutorials I learnt, if this happens (actual is lower than forecast) than the currency (in this case AUD), drops and thus in the pair AUD/USD, the pair may go DOWN. Is this correct?
Regarding NEWS READING and analysing the news, what other points indicate an up or down move in a currency (pair)? I appreciate a detailed explanation. Thank you!

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Signs of weakness after a rally in copper

Copper, 240 min

Price of copper surged last week alone by over 7% as shorts were squeezed after a sustained rally in oil supported the commodity complex. This drove the price copper into a weekly resistance area at 2.2246 – 2.2820, an area that coincides with the upper weekly Bollinger Bands. Since the March 4th peak the price of copper has shown signs of weakness and reacted lower from the highs. As the nearest important daily support level is at 2.1493 there is room for further correction.

We look for sell signals inside the 2.2538 – 2.3040 Sell Area with Target 1 at 2.1617 – 2.1891 and Target 2 at 2.0740 – 2.1013. Traders may consider setting stops and position sizes according to the risk management principles taught in my webinars. I advise to use my analysis if your own analysis agrees with it and you have attended my webinars to learn how to manage risks.

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Macro Events & News

FX News Today

German trade surplus narrows as exports continue to drop. Germany posted a sa trade surplus of EUR 18.8 bln in January, down from EUR 20.3 bln in the previous month. The narrowing reflects a second monthly drop in exports, which fell -0.5% m/m at the start of the year. Imports meanwhile rebounded and rose 1.2% m/m in January, after falling -1.6% m/m in December. This is nominal data that is impacted by oil prices and forex developments, but it confirms the trend of growing imports and slowing export demand, which means the German recovery is for once not export driven, but supported by consumption and lately also investment.

Reserve Bank of New Zealand (RBNZ) cut 25 bps to 2.25%, contrary to widespread expectations for no change. Rate cuts were anticipated this year, just not so soon. Today’s cut was due to a concern over eroding inflation expectations. And more could be in store: Governor Wheeler said “Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. A further cut could come as early as next month on April 28.

China’s CPI accelerated to a 2.3% y/y pace in February from the 1.8% growth rate in January. While that left CPI expanding at the fastest pace since the middle of 2014, the gain was driven by food costs, which spiked higher during the week of Lunar New Year holidays. Colder weather also lifted food prices. Hence, the pick-up in the CPI growth rate should prove temporary. Underlying inflation remains tame, leaving ample leeway for the government to implement further monetary and fiscal stimulus this year. The PPI fell 4.9% y/y in February after the 5.3% drop in January, leaving the 48th consecutive decline.

There weren’t any real surprises from the Bank of Canada, as it left its policy rate unchanged at 0.50%. The key take-away from January, that risks to the inflation profile remained largely balanced, was repeated. Though the general tone of the announcement might have been a little more upbeat, there was still plenty of caution noted given downside global risks. Meanwhile, the S&P/TSX was the global outperformer (excluding Italy), rising almost 0.7%, doubling the gain on Wall Street, thanks to its heavy weighting in oil and commodities.

Main Macro Events Today

ECB Interest Rate Decision: The ECB is widely expected to ease policy again today when updated set of staff projections will likely bring downward revisions to growth and inflation projections. A deposit rate cut of at least 10 bps together with the introduction of a tiered system to soften the impact is widely priced in. The ECB is also widely expected to widen monthly QE purchases but without a very large deposit rate cut or a change in the pool of assets, Draghi will eventually run into supply constraints, with German bonds the bottle neck the ECB has to funnel its monthly QE spending through unless the ECB abandons the rule of purchasing paper in line with the policy key. That, however, could be interpreted as outright state financing, and such a decoupling or too “exotic” moves could bring Draghi further into conflict with the Bundesbank, but refraining from radical steps risks disappointing markets.

US Jobless Claims: Weekly US Jobless Claims (expectations 270k) and Continuing Jobless claims (expectations 2,218K) have been following a volatile downward trajectory since early October of last year. Weaker than expected data will add to the slowing path of rate hikes, better than expected will add to the NFP figures from last Friday and increase speculation regarding a move by the FED next week.

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Macro Events & News

FX News Today

ECB’s policy “bazooka” backfired at least yesterday, where a buffet of easing steps were at first embraced then later spurned by the markets. For a while it seemed like Draghi had found his magic touch again. By burying a rather modest deposit rate cut in a broad package of other stimulus package, including a new corporate bond purchase program, he managed to keep markets happy, bring in spreads and give stock markets a boost, but only for an hour or so. Peripheral government bonds, stressed banks and corporate bonds were the main beneficiaries. In the long run though Draghi’s eagerness to shield highly indebted countries and banks struggling with non-performing loans may come back to haunt the ECB and the Eurozone. It would appear Draghi did too good a job of signaling the moves in advance, which were clearly priced in, then followed by rapid unwinding on-the-fact. He also managed to confuse markets while he initially managed to bury the modest deposit rate cut in a host of other measures and implicit easing bias. He undid most of the good work by remarking that he doesn’t expect it to be necessary to cut rates again. Given the ECB’s track record, the only thing that means is that there won’t be another cut at the next meeting, and we would expect markets to settle down again today as the details of the stimulus package sink in. Today’s CPI number release from Germany won’t change the picture either as numbers were in line with expectations and mostly unchanged.

Japanese business sentiment deteriorated abruptly in the first quarter, the BSI Manufacturing Index indicated today. Financial market turmoil and slow demand globally had impacted negatively Japan’s flimsy economic recovery. The data pressures the policymakers to deploy extra stimulus measures to reflate an economy that is bordering on yet another recession. BSI Index measuring sentiment at large manufacturers came in at -7.9 in January-March, swinging from 3.8 in Q4 2015. BSI index is a joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office.

OPEC, Non-OPEC meeting unlikely to happen on March 20 as previously scheduled, as Iran has yet to agree to the oil production freeze, according to sources cited on Reuters earlier. That sure could explain the reversal in NYMEX crude into the red by -1.9% and back below $38 bbl to the $37.50 area.

Canada’s erosion in Q4 capacity use was not a surprise, as the drop to 81.1% in Capacity Utilization Rate fit with the already revealed slowing in real Q4 GDP growth to an 0.8% pace (q/q, saar) from the 2.4% growth rate in Q3. Revisions were substantial in today’s report, but the pattern in 2015 remained intact: The post-recession Q4 2014 near term peak use rate was revised to 82.8% (was 83.3%), falling to 81.9% in Q1 (was 82.5%) and 80.5% in Q2 (was 81.4%) before rising to 81.6% in Q3 (was 82.0%).

Main Macro Events Today

Canada Employment numbers: We expect employment to rise 10.0k in February (median same at +10.0k) after the 5.7k drop in January. The year started out in a mess, with crude oil prices plunging and global growth worries intensifying. Against that backdrop, total jobs dipped. A less dire backdrop of firmer oil prices and markets that were not melting down is expected to lead to some optimism, lifting employment in February. But the resource and manufacturing sectors remained a drag, which may leave another disappointing report.

Baker Hughes Oil Rig Count: Trends in rig counts are significant clues for market participants in the oil and gas sector as they reveal the supply dynamics in the sector. Rig counts are reported week on Fridays. On March 7th the company announced that the international rig count for February 2016 was 1,018, down 27 from the 1,045 counted in January 2016, and down 257 from the 1,275 counted in February 2015. The worldwide rig count for February 2016 was 1,761, down 130 from the 1,891 counted in January 2016, and down 1,225 from the 2,986 counted in February 2015.

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EURUSD Rolling Over

EURUSD, 240 min

German HICP was confirmed at -0.2% y/y in final February data, as expected and down from +0.4% y/y in January. The data hasn’t and won’t have market impact, although endorsing the ECB’s anti-deflationary bazooka of stimulus measures yesterday. Oil prices, which reached a 12-year low in January, have been driving inflation down.

EURUSD rallied too far too fast and became overbought. Now this extreme condition has been unwinding and the pair looks like a sell. In my view a more ideal level to short this market would be my Sell Area between 1.1148 and 1.1185 but the price action seems to indicate that the pair could turn lower from levels near 1.1040. This level is a more aggressive entry option while those preferring to wait for a more conservative entry might prefer to wait for a further move into the Sell Area. In either case we consider short trades only if price action confirms the trade idea. Target: at 1.1050-1.1075.

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Macro Evens and News

FX News Today

The improvement in stocks has run out of steam, which should keep bond futures supported. Asian stock markets are mostly slightly down, stock futures in the UK and the US are also heading south, after the BoJ kept policy on hold, while offering a somewhat bleaker picture of the economy and highlighting that inflation expectations are weakening. The door to further easing remains open then, but the BoJ’s decision to stay pat for now, is likely to be mirrored by other central banks this week. The Fed starts its two day meeting today and SNB and BoE will announce their policy decisions on Thursday, with policy expected to be kept on hold, leaving the focus on statements.

RBA – Upbeat on jobs but does not rule out rate cut. The Minutes from the last RBA meeting show that it does not rule out another rate cut. Employment has stalled in January, following a very strong end to 2015. “Nevertheless, conditions in the labour market had clearly improved since early 2015,” the RBA said. “Leading indicators of employment had increased further and were consistent with employment growth in the months ahead. “But the central bank said low inflation will allow it to cut the cash rate if jobs growth flattens out or the global economy goes into meltdown. “Continued low inflation would provide scope to ease policy further, should that be appropriate to lend support to demand,” the minutes said.

BoJ kept policy on hold, but signalled an implicit easing bias, by painting a bleaker picture of the economy and warning that inflation expectations are falling. The bank also announced that it will exempt around USD 90 bln in money-reserve funds (MRFs) – short term funds – from negative rates, after warnings that investment money would be driven into bank deposits. The pledge to increase base money at an annual rate of JPY 80 trillion was left in place. The BoJ said that while “Japan’s economy continues to recover moderately as a trend”, the pick up in exports, which was still seen in January, has paused, mainly due to slowing growth in emerging market economies. At the same time it said inflation expectations weakened recently. So the door to further easing is left open.

ECB ups pressure on governments to implement structural reforms. Bank of France head Villeroy stressed that monetary policy alone cannot revive the economy and said France needs reforms to boost conference. ECB’s Rimsevics also said that monetary policy can only buy time and that politicians need to act on reforms. Hardly anything new, but with the ECB effectively removing market pressure on governments Draghi finds that verbal pressure alone is a blunt tool.

Main Macro Events Today

US PPI: February PPI is expected to decline by 0.3% (median -0.2%) in its Tuesday release with the core figure down -0.1% (median -0.2%). This compares to January figures which had the headline up 0.1% and the core up 0.4%. Data in line with our forecasts would result in a flat y/y headline with a 1.1% y/y pace of growth for the core. Oil price declines have tapered off but are still likely to weigh on the release.

US Retail Sales: February retail sales data is out on Tuesday and the headline should decline 0.2% (median -0.1% with the ex-autos figure down 0.3% ( median -0.2%) for the month. This follows January figures of 0.2% for the headline and 0.1% for the ex-autos figure.

US NY Fed Empire State Manufacturing Index: The March Empire State Index is out Tuesday and should reveal a headline increase to -12.0 (median -12.0) from -16.6 in February and -19.4 in January. Producer sentiment was strong over the course of the fall but weakened into the new year. We expect the ISM-adjusted average of all measures of sentiment to hold at 49 for a third month.

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Macro Events and News

FX News Today

European Outlook Asian stock markets are mixed, with the ASX posting slight gains, but Japanese markets under pressure as the Yen strengthens ahead of the Fed announcement today. UK and US stock futures are moving higher though, indicating that there is some room for improvement. Investors continue to hold back ahead of upcoming policy decision, with BoE and SNB due to tomorrow, after today’s FOMC decision. We don’t expect policy changes, but the statements will give an idea about the direction of policy going ahead.

China Premier Li discussed the financial system which he said primarily needs to support the real economy. He acknowledged that bad loans are on the rise and some industries face difficulties, but banks have enough bad loan provisions to cope with risks. Li also said China will use some market-oriented measures to lower debt levels at companies and plans to use debt-to-equity swaps to lower debt levels. Those swaps have been rumored in the marketplace and could cause a stir on the fact. He urges regulators to not lower diligence against financial risks, though the global economic recovery is fragile.

US retail sales were modestly disappointing, with small 0.1% February declines with and without autos that followed downward January revisions that more than offset small December boosts. We saw a February hit from gasoline prices and hefty upward revisions in the building material sales data since December. We expect 1.8% Q1 GDP growth after a Q4 GDP boost to 1.2% from 1.0%, with a 3.7% (was 3.8%) Q1 clip for real consumption after a small Q4 boost to 2.2% from 2.0%.

US PPI dropped 0.2% in February, the headline drop with a flat core price figure track assumptions, following the January mix of a 0.1% headline rise with a 0.4% core price surge, as oil prices weighed on the headline while core price gains moderated after surprisingly big January increases.

Main Macro Events Today

FOMC Interest Rate Decision: FOMC now likely to remain on hold through Q1 given its downgraded outlook and the weakness in recent data, and probably won’t adjust rates upward until the June 16, 17 meeting (the next one beyond March that includes a press conference and SEP). We look for 25 bp rate hikes in June and September.

US CPI: We expect a 0.2% February CPI headline drop led by a 10% gasoline price plunge, with a 0.1% core price increase. The “core” y/y rise should remain at January’s 2.2%. The 0.028% January U.S. CPI rise with a sturdy 0.293% core price increase beat estimates despite the expected 2.8% energy price drop and flat food price figure thanks to a 0.5% rise in medical care service prices, a 0.6% apparel price bounce after four consecutive declines, and a 0.3% new vehicle price rise after two flat figures. We also saw a fourth consecutive 0.2% rise for owners’ equivalent rent.

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Macro Events and News

FX News Today

German PPI falls 3% in February: The index of producer prices for industrial products fell by 3.0% compared with the corresponding month of the preceding year. In January 2016 the annual rate of change all over had been –2.4%.In February 2016 energy prices decreased by 9.4% compared with February 2015, prices of intermediate goods by 2.2%. In contrast prices of non-durable consumer goods rose by 0.2%, prices of capital goods by 0.7% and prices of durable consumer goods by 1.4%.The overall index disregarding energy decreased by 0.7% compared with February 2015.Compared with the preceding month the overall index fell by 0.5% in February 2016 (–0.7% in January 2016 and –0.5% in December 2015).

European Outlook: Asian stock markets moved broadly higher, with Japanese markets again the notable exception and weighed down by ongoing strength in the Yen. US and especially UK stock futures are also up and UK stock markets seem set to outperform again. Eurozone stocks failed to extend gains yesterday and especially the DAX was hit by the strength of the EUR, which climbed above 1.13 against the USD. With the round of central bank decisions out of the way markets can get down to closer evaluation of the measures and implications, but currency reactions already showed that the race to the bottom on rates doesn’t always have the desired effect. Oil continued to rally as WTI traded over $40 and the mood heading into the London session remains mostly risk-on, Brent crude prices have logged a three-month high at $41.69. The mood looks likely to continue with scheduled Fed speakers today being known doves.

BoE & SNB – Both in Wait and See Mode: BoE and SNB left policy on hold yesterday and the statements were if anything less dovish than some may have hoped for. The BoE left its implicit tightening bias in place, even if rate hike expectations have been pushed out into 2017 and the bank is effectively on hold. The SNB meanwhile noted a weaker growth environment and lowered its inflation projections, but argued that its current negative rate, coupled with ad hoc intervention on forex markets should be sufficient to cope with that.

ECB’s Draghi “stands ready to use all instruments” in a timely repetition of last week’s dovish statements, arguing that the ECB’s package was very strong and will channel financing to the real economy, while interest rates will remain steady to lower for an extended time. Though he sees some signs of economy improvement, risks remain to the downside. The euro has pulled back from highs, though this merely confirms the FX games continue after BoJ’s Kuroda suggested rates could go as low as -0.5% under NIRP earlier this week and the BoJ made some inquiries into just what was driving the yen firmer yesterday.

Main Macro Events Today

CAD CPI: We expect CPI, to slow to a 1.3% y/y pace in February (median +1.5%) after the 2.0% y/y growth pace in January that was the fastest annual CPI growth rate since November of 2014. CPI is seen rising 0.1% on a month comparable basis in February (median +0.2%) after the 0.2% gain in January. The BoC’s core CPI index is seen rising 0.7% m/m in February, consistent with recent moves in this not seasonally adjusted index during February, after the 0.3% gain in January. Annual core CPI growth is expected to expand at a 2.2% y/y rate in February (median 2.1%), up from the 2.0% pace in January. The expected core CPI figure would, of course, leave the measure above the BoC’s 2.0% midpoint. Governor Poloz has maintained that the elevated core CPI growth rates are transitory and not reflective of a tightening in supply conditions.

US Michigan Consumer Sentiment: U.S. Michigan Consumer Sentiment Preview: The first release on Michigan Sentiment is out Friday and should show a rise to 92.0 (median 92.2) from 91.7 in February. Current conditions should be 106.9 from 106.8 in February and expectations should be 82.0 from 81.9 in February. The IBD/TIPP Poll for the month rose to 46.8 from 47.8 and we expect the Bloomberg Consumer Comfort survey to average 44.0 in March.

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The Economic Week Ahead

Main Macro Events This Week

United States: Housing reports dominate an otherwise thin week. And while there are some important releases on the docket, the market impact should be minimal since the FOMC is out of the picture for now and as the data aren’t likely to change current outlooks. Trading is likely to be thinned by the approaching holiday. Existing home sales (Monday) are expected to edge up 0.5% to 5.500 mln in February (median 5.355 mln) following the 0.4% January gain to 5.470 mln. This would be a 3rd straight monthly gain as the sector continues to recover from “Know Before You Owe” distortions. There is some downside risk due to the 3 point decline in the February NAHB index. New home sales for February (Wednesday) are expected to climb 1.2% to a 500k pace (median 510k), erasing the 9.2% January drop to 494k. Durable goods orders (Thursday) are projected to decline 2.0% (median -2.4%) in February, almost halving the 4.7% January rebound, as the headline index continues its saw-toothed path. Revised Q4 GDP (Friday) should be revised a tad higher to a 1.2% growth clip (median 1.0%), from the 1.0% pace posted previously, though is down from the 2.0% Q3 rate.

Canada: Data and events slow to a trickle this week after the strong flow last week. Indeed, there are not any economic reports due — the next release is the Industrial Product Price index at the end of the month.

Europe: This week’s economic calendar holds an almost full round of confidence data, but with the ECB busy implementing the new measures, the data won’t have any immediate impact on policymakers. We are looking for a rise in the March ZEW Economic Sentiment (Tuesday) 4.5 (median 5.0) from 1.0) in February. The Ifo Business Climate (Tuesday) reading for March, meanwhile, is still expected to ease slightly to 105.6 (median 105.7) from 105.7, as future expectations remain depressed by weak orders inflow and falling exports. EMU PMI readings (Tuesday) for March, on the other hand, could well be mixed again, and we expect them to recover somewhat and rise to 51.4 (median 51.3) from 51.2, while the services reading is seen unchanged at 53.3 (median same), which should leave the composite at 53.0 (median same) also unchanged from the previous month. Finally French business confidence (Thursday) is also expected to hold steady at 103 (median same).

UK: The CBI industrial trends gets the ball rolling (Monday). We expect it to improve to -14 in the March survey (median same) from -17 previously. February inflation data (Tuesday) has us anticipating a further uptick in headline CPI to 0.4% (median same), up from 0.3% previously. This would be in line with BoE projections. February retail sales (Thursday) are expected to dip 1% m/m (median same) to take the y/y figure to +3.4% from +5.2% in the previous month. The March CBI distributive sales survey (Thursday) is expected to come in unchanged at a +10 reading in the headline realized sales figure.

China: There are no economic data releases scheduled this week.

Japan: Markets are closed today for the Vernal Equinox. Markets reopen Tuesday to the release of the March Nikkei manufacturing PMI. It’s been trending down since October, and the 2.2 point drop in February to 50.1 puts the index just barely above shrinking territory. The January “All Industry” activity index is due Tuesday too. It’s seen only one positive reading over the past six months (from July). Highlighting Friday is the February national overall CPI, seen up 0.4% y/y from the prior unchanged reading, while at the core level, prices are seen unchanged y/y as they were in January. March Tokyo overall CPI is expected unchanged y/y versus -0.1% in February, while core likely fell 0.2% y/y versus the previous 0.1% outcome. February services PPI (Friday) is penciled in at 0.2% y/y, as it was in January. Revised January leading and coincident indices are also on tap.

Australia: The thin calendar does feature two appearances from RBA officials at the ASIC Annual Forum 2016 in Sydney (Tuesday). Governor Stevens will deliver a speech and Assistant Governor (Financial System) Malcolm Edey will participate in a panel. There is little on the economic data docket this week, although the Q4 home price index (Tuesday) is scheduled for release.

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Macro Events and News

FX News Today

European Outlook: Asian stock markets were mixed, with Japan outperforming and posting robust gains as the Yen weakened following hawkish comments from Fed officials yesterday. U.S. stock futures are down, but U.K. stock futures are moving higher and with the EUR falling against the USD and the front end Nymex future holding above USD 41 per barrel, the DAX may take another attempt at clearing the 10000 mark. The calendar is full today, with Eurozone confidence data in the form of ZEW, Ifo and PMIs and U.K. inflation and public finance data.

Japan flash manufacturing PMI falls: Japan flash manufacturing PMI sank to 49.1 in March compared to 50.1 for the final February reading, registering the first contraction since April of 2015. New export orders shrank at the quickest pace in over 3-year as well, falling from 49.0 in February to 45.9. This stands in contrast to words of optimism Finance Minister Aso, who earlier said that underlying economic fundamentals were firm and there’s no need now for compiling economic stimulus steps. The Yen fell on the news with the USDJPY recovering the 112.00 level it last traded above on Thursday.

Fed’s Lockhart and Williams cautioned that a rate hike in April is possible: This echoes sentiment from Fed Chair Yellen last week, (remember too that Yellen indicated late last year that ALL meetings are live). So this sentiment should not be surprising. However, what is different in these remarks is that Williams has been one of the more dovish on the FOMC until sliding toward the hawkish side late last year, while Lockhart have been a dovish leaning centrist. Such comments, especially in the wake of last week’s policy meeting, where not only was there no further boosts in rates, but the Committee revised down its outlook for the Fed funds rate path for 2016. Such comments will only serve to keep the markets confused and anxious, and won’t help the FOMC’s credibility. June still seems like the better date for the next rate hike.

OPEC says it’s up to Iran: The cartel said Monday that it is up to Iran whether it participates in the oil freeze, given some conditions it has placed on its output, though it may join in the future, said Secretary General El-Badri. He earlier said that all OPEC countries will be invited to the April 17 producer meeting, expressing optimism that the upward price trend will continue, though at this time the only problem is that the market has an overhang of 300 mln barrels. Well, that’s the producer side solved then. NYMEX crude (USOil) traded higher overnight at $41.50 bbl or about 1.5% higher on the session.

Main Macro Events Today

Euro Data: Today brings an almost full round of Eurozone confidence indicators and overall we should see some stabilisation, with especially the ZEW expected to benefit from the prospect of further ECB stimulus. We are looking for a rise in the March ZEW to 4.5 (median 5.0) from 1.0. The Ifo Business Climate reading, meanwhile, is still expected to ease slightly to 105.6 (median 105.7) from 105.7, as future expectations remain depressed by weak orders inflow and falling exports. EMU PMIs on the other hand, could well be mixed again, and we expect the EMU Manufacturing PMI to recover somewhat and rise to 51.4 (median 51.3) from 51.2, while the services reading is seen unchanged at 53.3 (median same), which should leave the composite at 53.0 (median same) also unchanged from the previous month.

UK CPI and PPI: UK CPI for March y/y is announced today with a expectations of and increase to 0.4% from 0.3% in February. This is the most important inflation data from the UK as it is used by the Bank of England as their inflation target. Later PPI input and output data will be release showing changes in the prices at the factory gate. Input prices are likely to rise 0.4% with output prices flat.

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Macro Evens and News

FX News Today

European Outlook: Asian stock markets were mostly slightly lower, U.S. and U.K. stock futures are also heading south. European markets managed to close with a slight gain yesterday, after recovering from the initial bout of risk aversion following the Brussel’s terror attacks. Today’s calendar is pretty empty, with a German 30-year Bund sale and comments from Bundesbank President Weidmann.

Fed’s Evans looks for 2016 growth of around 2% to 2.5%: The economic fundamentals are quite good, sharing the views of his FOMC colleagues, while adding that international developments have been a drag. But, he seems a little more cautious in terms of future rate hikes. And unlike Williams or Lockhart who underscored that April is a live policy meeting in recent comments, he said a “wait and see” approach is more appropriate so that risks can be assessed. Remember though, that he has been one of the more ardent doves (though so was Williams). The economic and financial risks in 2016 are somewhat higher than he had hoped. He also suggested 2 rate hikes this year is a decent assumption. The non-voter also said the Fed needs rates to go up organically, as a result of a stronger economy.

U.S. Markit flash manufacturing PMI up to 51.4: It rose 0.1 in March, after declining 1.1 points to 51.3 in February. However, this is a 5th straight month the index has held a barely expansionary 51, 52 handle. The index topped out last year at 55.7 in March and generally eroded from there. Both employment and new orders increased. The improvement is consistent with the trend in Eurozone PMI data earlier yesterday which mostly beat expectations.

Iraq plans to accept the oil freeze proposal: According to the Iraqi oil ministry they will accept the proposed freeze at January output levels. This followed news that marginal producer Libya did not plan to attend the Doha OPEC meeting in April. WTI crude oil (USOil) lost 1% overnight but remain close to three month highs, it is currently trading at $41.00. US weekly crude inventories are released later today and are expected to increase to 2.5m bbls.

Main Macro Events Today

US New Home Sales
February new home sales are out later today and should reveal a 1.2% increase to a 500k (median 520k) pace from 494k in January and 544k in December. Other data for the month were mixed with the MBA purchase index down 4.9% after rising 1.4% in January and existing home sales dropping 7.1% to 5.080 mln from 5.470 mln in January. New Homes Sales are a leading indicator of economic activity due to its impact on other sectors such as mortgages, furniture and appliance sales and general confidence.

Weidmann Speech
Jens Weidmann the President of the Deutsche Bundesbank is due to speak at the Liechtenstein Finance Forum. He is a full voting and very influential member of the ECB Governing Council. He is likely to remain critical of any further ECB activism.

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Macro Events and News

FX News Today

European Outlook: Asian stock markets sold off overnight, oil prices are below USD 40 per barrel, and the USD continues to rise after hawkish Fed comments. The EUR is also up against most currencies, highlighting one of Draghi’s problems, which haven’t gone away after the last round of easing measures. US and UK stock futures are also down and it seems markets will be going into the Easter holidays with in a risk off mode, amid fresh uncertainties about the US rate outlook and geopolitical risks. EU Interior Ministers will meet today to talk about terror threats. The ECB publishes its monthly bulletin and the data calendar includes, French business confidence and UK retail sales.

US New Home Sales beat expectations: There was a 2.0% rise to a 512k rate in February after net upward revisions that left a 12.0% five-month climb from a 10-month low of 457k in September, though sales remain 6.1% below last February’s 545k cycle-high. Both inventories and median prices also beat estimates after upward revisions, with a 1.7% inventory rise to a six-year high in January and a 6.2% median price rise that leaves a 2.6% y/y increase. New home sales are poised for a 511k average in Q1 after disappointing 2015 rates of 510k (was 509k) in Q4, 488k in Q3 and 497k in Q2, but a higher 517k cycle-high rate in Q1 of last year. New home sales have risen 90% from the 273k record-low in February of 2011, alongside smaller cyclical climbs of 39% for pending home sales and 47% for existing home sales from lows in 2010. We saw big cyclical climbs of 146% for housing starts and 127% for permits from lows in 2009, and 142% for new home construction from a low in 2011.

Fed’s Bullard makes a case for April: In a Bloomberg TV interview, he has growing concerns about its guidance. He thinks policy is in reasonably good shape, but the odds the Fed falls behind the curve have increased modestly. There will likely be an overshoot on NAIRU near term, with the unemployment rate falling below 4.5% this year and that may force the FOMC to have to hike rates more rapidly later on, he acknowledged. Core PCE inflation should be over 2% in 2017. It’s unlikely the Fed will go to a negative rate policy. He also noted all meetings are “live.” Neither of those should be revelations, however, as the mix of data have indeed kept the door open for action next month (indeed, that was the surprise with the March FOMC, that it seemed to disregard the increase in inflation).

US VIX equity volatility has turned higher: with the downdraft on stocks after the perverse terror-rally on Tuesday succumbed to a round of hawkish Fedspeak, dollar gains and a commodity downturn yesterday. The VIX closed 5.43% higher just shy of the psychologically important 15 at a day high of 14.94. Having roamed as low as 14.17 after basing at 13.79 2016 lows on Monday. That’s still well off 32.09 2016 highs set back in January, but the VIX keeps getting capped by central bank policy largesse as the BoJ followed the ECB into NIRP and the Fed took a dovish tack in its statement last week. Looks like the VIX is getting complacent again relative to global risks, which could put in a floor in the 12-14 zone before a run back over 20 if the S&P 500 retests its 2,017 200-day MA on the downside again.

Main Macro Events Today

UK Retail Sales:
Expected to fall -0.7% from a rise in February of 2.3% It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. If the fall is less than expected then this could be positive for GBP.

US Durable Goods:
Durable goods orders expected to fall 2.0%., Shipments expected at -0.5%.Inventories expected to grow 0.1%.I/S ratio expected at 1.65 from 1.64 in January. Forecast risk: downward, as there was a decrease in Boeing orders in February.

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Macro Events and News

FX News Today

US Durable Goods – Big February declines: Also downward January revisions across all the major orders, shipments, equipment and inventory figures that reflected weakness both with and without transportation and defense orders declines. We lowered our Q1 GDP growth forecast to 1.4% from 2.0% after a likely Q4 boost to 1.2% from 1.0%, given what we now assume will be a 3% Q1 contraction rate for equipment spending, versus our prior 4% projected growth clip. Inventories are poised to subtract $22 bln from GDP in Q1 to leave a $57 bln accumulation rate, after a $6.3 (was $3.8) bln subtraction in Q4. We expect a 0.5% February factory inventory drop with a 0.2% total business inventory decline, given today’s 0.3% factory durable inventory decrease. We assume a 2.2% February factory orders drop with a 1.2% factory shipments decline, given an assumed 1.5% price-led nondurable shipments and orders drop.

US Markit flash services PMI improved: There was a 1.3 points to 51.0 in March after diving 3.5 points to 49.7 in February. The bounce puts the index back into expansionary territory after the surprise February decline to the lowest reading since October 2013. However, the new business index slid to 50.8 from 52.1, and is the lowest reading on record. The March composite index also rose 1.1 points to 51.1 from February’s 50.0 (which was also the lowest since October 2013). New orders declined to 51.2 from 52.2, and is a record low. Though the headline gains are good news, some of the internals inject a question mark into the growth outlook.

US Initial Unemployment claims rise to 265k: This was for the third week of March followed big downward claims revisions in both January and February attributable to annual revisions that left a lean 259k (was 265k) BLS survey week figure and a 253k (was 259k) cycle-low at the start of the month. The revised data still show elevated holiday levels, but less of an auto-retooling hit in July. Claims are averaging just 260k in March, versus prior averages of 261k (was 269k) in February, 282k (was 284k) in January and 277k in December. The 259k BLS survey week reading sits close to the 260k (was 262k) February BLS figure and below prior BLS readings of 291k (was 294k) in January, and 275k (was 272k) in both November and December. We expect a 190k March nonfarm payroll rise that undershoots the 242k February pop but beats the 172k January increase, with upside risk from a tightness in claims, a firming in producer sentiment after weak winter readings, and an encouraging ADP path through a 214k February rise.

Main Macro Events Today

US GDP
The third release on Q4 GDP is out today and should reveal a revised headline of 1.2% (median 1.0%) from 1.0% in the second release, 0.7% in the first release and 2.0% in Q3 of last year. We expect $6 bln in net upward revisions in the release with consumption revised up by $5 bln, net exports up by $4 bln and construction revised up by $2 bln but with offsetting revisions of -$1 bln for equipment and -$2 bln for intellectual property.

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The Economic Week Ahead

Main Macro Events This Week

United States: It will be a busy week ahead in the US and upcoming data could have significant implications for the Fed and the policy outlook. The March jobs report highlights and expectations points to a 200k rise, with a steady 4.9% unemployment rate. The economic calendar kicks off with personal income report (Monday), seen rising a mild 0.1% in February vs 0.5% in January; PCE prices may sink 0.2% on the month. The advance trade deficit may hold steady near -$62.6 bln in February, while NAR pending home sales are expected to rise to 106.5 in February from 106.0 and the Dallas Fed index may rebound to -20 for March from -31.8. The Case-Shiller report on home price index (Tuesday) may tick down to 182.9 in January from 182.8. Also, consumer confidence is forecast to rise to 93.0 in March (median 93.7) vs 92.2, despite headwinds from market and energy price volatility. MBA mortgage applications are due (Wednesday), along with the ADP employment survey set to rise 180k in March (median 190k) vs 214k. EIA energy inventories rose sharply with API last week and will be closely monitored again after denting crude oil. Initial jobless claims (Thursday) are estimated to rise 13k to 278k, while Chicago PMI may bounce to 49.0 in March (median 49.5) vs 47.6. In addition to the jobs report (Friday), construction spending is seen flat in February, final Michigan sentiment is due for March, ISM may nudge up to 50.0 in March (median 50.6) vs 49.5 and auto sales are on tap over the course of the session.

Canada: January GDP report (Thursday) takes top billing this week, with growth expected to expand 0.2% in January compared to December, extending the run of monthly gains to four straight. GDP grew 0.2% in December after an 0.3% gain in November and 0.1% rise in October. A firm showing for January GDP would put real Q1 GDP on track. The industrial product price index (Tuesday) is seen dipping 0.1% m/m in February on a not seasonally adjusted basis following the 0.5% bounce in January. The raw materials price index is projected to fall 0.5% on a not seasonally adjusted basis after the 0.4% decline in January. January average weekly earnings (Thursday) are anticipated to gain 0.3% m/m following the 0.9% surge in December. The earnings figures are part of the establishment survey, which also contains an employment estimate. Employment grew 36.1k in December after the 13.0k rise in November. The much more timely labour force survey saw a 2.3k drop in February and 5.7k dip in January after the 22.8k gain in December, suggestive of a dip in the establishment survey’s employment measure during January.

Europe: This week’s data releases focus on preliminary inflation numbers for March. The German HICP rate (Wednesday) is expected to rise to -0.1% y/y (median same) from -0.2% y/y, and an increase in the French HICP rate (Thursday) to 0.0% y/y (med same) from -0.1% y/y, which should see the overall Eurozone number (Thursday), rising to -0.1% y/y (med same) from -0.2%. Core inflation is also expected to tick marginally higher. The calendar also has the last key confidence numbers for March – the EU Commission’s ESI Economic Sentiment Indicator (Wednesday), which after the better than expected PMI and IFO readings is seen rising to 103.9 (med 103.5) from 103.8. PMI readings still continue to point to modest expansion in overall Eurozone economic activity and this is also underpinning labour markets, although the pace of the decline is starting to wane. For now though the improving trend continues and we expect a renewed dip in the German (sa) jobless number of -3K (med -5K) in March, which should leave the jobless rate steady at a very low 6.2%. The overall Eurozone rate for February meanwhile is seen falling to 10.2% (med same) from 10.3%.

UK: This week brings March Gfk consumer sentiment (Wednesday), the third and final estimate of Q4 GDP (Thursday), Q4 current account data (Thursday), monthly BoE lending data (also Thursday), and the March Markit manufacturing PMI survey (Friday). Consumer sentiment is expected to ebb to -1 from 0 (median same), reflecting a recent ebb in economic momentum and sudden rise in Brexit risk. Q4 GDP is expected to come in unrevised at 0.5% q/q and 1.9% y/y (median same). February lending data is expected to show mortgage approvals dip to 73.5k from 74.6k, and consumer lending dipping to GBP 1.3 bln after a strong GBP 1.6 bln reading in the month prior. The manufacturing PMI release is expected at 51.2, which would signal a steadying in activity after the sharp drop in a 50.8 cycle low in the month before.

CHINA: February leading indicators are due during the week.

JAPAN: Most of the data comes on Tuesday, with February unemployment expected steady at 3.2%. February personal income is due, along with February PCE, which likely fell 2.0% y/y as compared to January’s -3.1% reading. February retail sales are forecast to have risen 1.5% y/y from the prior 0.9% increase for large retailers, and up 0.3% from -0.1% for total sales. Wednesday brings preliminary February industrial production, where we expect a 5.0% y/y drop, versus the 3.7% gain in January. February housing starts (Thursday) are penciled in at -3.0% y/y from the 0.2% January increase. February construction orders are also due Thursday. On Friday, the March Tankan index is estimated to have slipped to 8 from 12 for large manufacturers, and 23 from 25 for large non-manufacturers.

AUSTRALIA: Economic data is lacking in top tier releases, although private sector credit for February (Thursday) is scheduled.

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Macro Events and News

FX News Today

Very mixed data from Japan overnight: Household spending exceeded expectations at 1.2% (-1.8% expected) however, the Unemployment rate inched up to 3.3% from 3.2% and Retail Sales also missed significantly coming in at 0.5% against expectations of 1.6%. Prime Minister Abe assured markets that he will proceed with the scheduled tax hike next year (since the first one went so well) unless Japan is hit by a Lehman crisis-scale shock of 2008 or an earthquake on the scale of 2011’s. He’s also not thinking at all about dissolving the Lower House and calling snap elections. A majority of analysts still expect Abe to delay the proposed sales tax hike to 10% from 8% slated for April of next year. USDJPY trading higher at 113.40.

US Reported a weak Q1 consumption: The February personal income report halved Q1 “real’ consumption growth forecast to 1.8% from 3.6%, and trimmed Q1 GDP growth forecast to 1.0% from 1.4%. There was also a small widening in the February goods trade deficit to $62.9 bln, though there was big February export and import gains that mostly reversed outsized declines in January to leave a better Q1 outlook for global trade. The bad news for spending was partly offset by a big Dallas Fed bounce to -13.6 from -31.8 with an ISM-adjusted rise to 47.6 from 44.4, alongside a 3.5% February pending home sales rise that’s consistent with comfortable housing sector gains into the Spring home sales season.

Fed Policy Outlook: The already slim chance for an April rate hike was lowered further by the disappointing income report. The sluggish Q1 growth outlook, along with the failure for PCE to edge closer to the FOMC’s 2% target, should keep the Fed sidelined until at least June. Comments from several Fed officials last week, including several doves, all of whom reminded that April was in play, increased worries that the Fed could pull the trigger next month. But that seems highly unlikely now, and Fed funds futures are creeping higher again too. The implied May contract points to a 0.390% rate, only fractionally higher than the current 0.375% target mid-point.

Main Macro Events Today

US Consumer Confidence
March consumer confidence is out later and should reveal a 94.0 (median 93.7) headline, up from 92.2 in February. Already released measures of confidence for the month spell out the potential for downside risk to the headline. The Michigan Sentiment report revealed a decline to 90.0 from 91.7 in the first release and the IBD/TIPP Poll fell to 46.8 from 47.8 in February.

Fed Chair Yellen Speech
Due to deliver a speech titled “Economic Outlook and Monetary Policy” at the Economic Club of New York luncheon. All eyes on the speech as traditional Doves on the FOMC have become more hawkish in recent pronouncements.