Week Ahead: FOMC’s symmetric minutes, German sentiment, UK inflation

Week Ahead
XRay

FOMC Minutes

The last meeting of the Federal Reserve Committee saw policymakers reaffirming their commitment to letting inflation run hot in order to make up for years of lacklustre price growth. Jerome Powell told reporters after the meeting that “we wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%”. Expect more underscoring in the minutes, and perhaps more softening of the economic assessment – the post-meeting statement revised its view of consumer spending to “moderate” from “strong” in December.

Germany ZEW sentiment

Industrial production data last week raised further questions over the outlook for the Eurozone. Production fell 4.1% during 2019, and now there’s the added threat of disrupted supply chains thanks to the coronavirus outbreak. Last month’s ZEW sentiment index surged to 26.7 from 10.7 in December, but recent developments suggest that optimism may have been premature.

UK CPI

A soft inflation reading in December had seen markets divided over whether or not the Bank of England was finally about to cut interest rates, having been on hold so long due to Brexit uncertainty. In the end Governor Mark Carney left things unchanged before passing the baton to Andrew Bailey. Another round of soft inflation data this week might not be enough on its own to persuade the Monetary Policy Committee that a rate cut is necessary, but if Friday’s preliminary Markit PMIs also show weakness markets are likely to raise bets on easing soon.

Eyes on OPEC

Oil markets had been hoping that OPEC would ride to the rescue this month, bringing forward its March meeting as the coronavirus outbreak hammers global oil demand. It now seems that this is unlikely, but any rumours to the contrary will still have a strong impact on oil. A change in diagnostic methods last week saw the number of coronavirus cases and deaths race higher, but equities largely shrugged this off. It’s commodities that are bearing the brunt of the economic impact, so key risks remain for oil on virus and OPEC-related headlines.

Heads-Up On Earnings

The following companies are set to publish their quarterly earnings reports this week:

17th Feb – 21.30 GMTBHP Billiton Q2 2020
18th Feb – 00.30 GMTReserve Bank of Australia Meeting Minutes
18th Feb – 04.00 GMTHSBC Holdings Q4 2019
18th Feb – 09.30 GMTUK Unemployment Rate, Average Earnings
18th Feb – 10.00 GMTEurozone/Germany ZEW Survey Results
18th Feb – Pre-MarketWalmartQ4 2020
18th Feb – Pre-MarketMedtronicQ3 2020
18th Feb – Pre-MarketGlencoreQ4 2019
19th Feb – 09.30 GMTUK Consumer Price Index
19th Feb – 13.30 GMTCanada Consumer Price Index
19th Feb – 19.00 GMTFOMC Meeting Minutes
20th Feb – 00.30 GMTAustralia Employment Change/Unemployment Rate
20th Feb – 01.30 GMTPeople’s Bank of China Interest Rate Decision
20th Feb – 07.00 GMTGermany GfK Consumer Confidence
20th Feb – 09.30 GMTUK Retail Sales
20th Feb – 12.30 GMTECB Monetary Policy Meeting Accounts
20th Feb – 15.30 GMTUS EIA Natural Gas Storage
20th Feb – 16.00 GMTUS EIA Crude Oil Inventories
20th FebBAE SystemsQ4 2019
21st Feb – 06.00 GMTAllianzQ4 2019
21st Feb – 09.30 GMTUK Market Flash Composite (Inc Flash Manufacturing/Services PMIs)
21st Feb – 10.00 GMTEurozone Consumer Price Index
21st Feb – Pre-MarketDeere & CoQ1 20202

Watch the Week Ahead on XRay

Highlights on XRay this week:

Daily08.15 GMTEuropean Morning CallFreeRegister
18th Feb14.15 GMTLive Trading Room with TrendsignalFreeRegister
18th Feb16.30-17.10 GMTAsset in Focus: Oil Gold and SilverFreeRegister
19th Feb 12.00 GMT Midweek Lunch Wrap FreeRegister
21st Feb13.00 GMTLive Trade Setups with Mark LeighFreeRegister

Week Ahead: Inflation headlines heavy data week

Week Ahead

Welcome to your guide to the week ahead in the markets.

US & Eurozone inflation 

As markets weigh the prospect of more stimulus from global central banks, hard economic data this week will be eyed for any signs that the premise on which market expectations are based is wrong. 

Friday sees the release of the flash CPI estimate for the Eurozone. Indications so far do not suggest inflation in the bloc is moving higher. The same day the Fed’s preferred inflation gauge, the core PCE measure, is released. Core CPI has been moving up lately but the PCE indicator has remained subdued. 

Brexit 

 After the G7 summit over the weekend, markets are looking to the EU and Britain for where the next move is on Brexit. MPs return on September 5th but there will be plenty of politicking going on behind closed doors before then.  

Australian data 

With Aussie traders looking to the next RBA meeting at the start of September, this week’s download of data will be closely assessed for clues about future rate cuts. Construction work done, building approvals and capital expenditure figures are all set for release in the coming days. 

China PMIs 

After the end of the trading week on Saturday we get the latest manufacturing and services figures out of China. The key question for risk assets is whether the trade war is still biting down on Chinese expansion.  

US data 

A batch of US figures are out including core durable goods (Monday), the second reading of the Q2 GDP print (Tuesday), while on Friday we get the Chicago PMI and University of Michigan consumer sentiment reports.  

Corporate Diary

Earnings season is wrapping up, with just a couple of releases this week.

Aug 26thDollar General
Aug 28thTiffany & Co
Aug 28thHewlett Packard
Aug 29thPernod Ricard
Aug 29thBest Buy
XRay

There are plenty of things to look forward to on XRay this week. You can watch live, or subscribe to view on catch up.

07.15 GMTAug 27thEuropean Morning Call
15.30 GMTAug 27thAsset of the Day: Bullion Billions
15.45 GMTAug 27thAsset of the Day: Oil Outlook
13.00 GMTAug 28thAsset of the Day: Indices Insight
07.00 GMTAug 29thLive Trading Room
Key Economic Events

There are a lot of dates for the diary this week, including US Core Durable Goods and Eurozone Flash CPI.

08.00 GMTAug 26thGerman IFO Business Climate
12.30 GMTAug 26thUS Core Durable Goods
14.00 GMTAug 27thUS CB Consumer Confidence
01.30 GMTAug 28thAustralian Construction Work Done
14.30 GMTAug 28thEIA Weekly Crude Oil Inventories
01.00 GMTAug 29thANZ Business Confidence
01.30 GMTAug 29thAustralia Private Capital Expenditure
12.30 GMTAug 29thUS Q2 GDP (2nd Reading)
09.00 GMTAug 30thEurozone Flash CPI
12.30 GMTAug 30thUS PCE Inflation

Payrolls day: eyes on wage inflation

Forex

Data this week from the US has offered some mixed signals. Employment via the ADP private payrolls number was strong, coming at 275k, well ahead of expectations. One cannot always see a direct correlation between the ADP print and the NFP number, but nonetheless it suggests another print at least in line with the 3-month average. Census hiring might skew the numbers to the upside – prepare for a 250k+ print this time as a result, which could cause a little volatility.

Meanwhile the Chicago and ISM PMIs were soft, coming in around their weakest in two years and suggesting some drag in some employment sectors.

Within the ISM numbers the Employment Index fell to 52.4%, a decrease of 5.1 percentage points from the March reading of 57.5%. The Chicago PMI also highlighted weaker employment, with the decline in demand and production matched by reduced demand for labour. The Employment Indicator fell to its lowest level since October 2017,  and below the three- and 12-month averages.

Earnings focus

PCE figures meanwhile, shows spending accelerated at the fastest pace in almost ten years, rising to 0.9% in March after a 0.1% gain in February. Personal incomes, rose 0.1% in March. Inflation fell to 1.6% from 2%. All told there is perhaps a sense that wages are not squeezing higher as much as expected.

Unemployment shows tightness

On unemployment, initial jobless claims were steady at a seasonally adjusted 230,000 for the week ended April 27th, after jumping 37k the week before, the biggest rise in two years. The four-month moving average of claims has inched up 6,500 to 212,500.

Last month marked a recovery in the headline number as the March figure climbed to 196k from the wobble in February. Wage growth however was much softer than expected, rising 0.1% MoM versus the 0.3% expected. This left annual average wage growth at 3.2%, short of the 3.4% expected which was printed the prior month.

Post-FOMC, the USD is firmer with a push off the 96 handle back towards the 98 handle. For a drive higher for USD we would like require a beat on wage growth more than anything else as big headline jobs number is easy to disregard month to month. In fact it’s hard to get quite as excited about the main NFP print these days, particularly as the numbers can be quite volatile month to month. Focus on the three-month average and the wage data. Also unemployment, should it fall further and highlight further tightening in the labour market will get the Fed’s attention.

GBPUSD is holding the 1.30 handle but a big number on wages may pressure the pair lower and a retreat to the 200-day line around 1.2960.  

Consensus expectations

190k jobs created

3.8% unemployment

+0.3% wages

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