The Reserve Bank of New Zealand is set to release its interest rate decision on Wednesday, followed by the eurozone inflation numbers for January. And of course, Friday’s PCE figures from the US will be carefully monitored by the Fed.
Monday will be a relatively quiet day in terms of economic data releases. The US and Canada exchanges will be closed due to the President’s Day and Family Day celebrations. From some individual European countries, we received the preliminary services and manufacturing PMI figures.
On Tuesday, the Asian morning will kick off with Hong Kong releasing its YoY CPI figure for January. The current expectation is a slight decline, going from +2.4% to +2.1%. Later on, during the European trading session, Germany will deliver its Ifo business climate index, which is forecasted to have ticked down a bit.
The reading is expected to go from 95.7 to 94.7. If the actual number comes out lower than the forecast, we may see the euro taking a slight hit against some of its major counterparts, such as USD. However, the negative impact might be a temporary occurrence, as the main focus would lie on the CPI figures delivered on Wednesday.
In terms of other economic events on Tuesday, the US will deliver its manufacturing PMI number, together with the preliminary services PMI figure. Currently, there are no available forecasts for the two indicators.
During the early hours of the Wednesday Asian morning, the Reserve Bank of New Zealand is set to release its interest rate decision. The Official Cash Rate is expected to go higher, from +0.75% to +1.00%. RBNZ has a target to bring the rate closer to 2.50% by November this year.
Given that this could be seen as a positive for NZD, it seems that most of the future hikes are already priced in. Also, other major central banks are planning their rate hikes, which means that NZD gains against some of its major counterparts might be on the modest side.
The Japanese market will be closed due to the Emperor’s Birthday celebration.
From Europe, we will receive the eurozone inflation numbers for January. For now, the core MoM and YoY figures are expected to have risen. The YoY one is forecasted to have moved from +2.3% to +2.6%, whereas the MoM reading is believed to have grown strongly, from -0.8% to +0.4%.
In terms of the headline MoM CPI number, there is currently no forecast available. However, the headline YoY reading is believed to have slid by a tenth of a percent, from +5.1% to +5.0%. Let’s not forget that the ECB’s inflation target keeps it stable at around 2% over the medium term.
Inflation already surpassed the 2% mark back in August 2021. And with inflation, which is already double the initial target, the ECB will have to think of measures of not allowing the CPIs to get out of hand. One of the options is, of course, to raise interest rates. That said, the ECB is not yet willing to take such measures.
Thursday will start with Hong Kong releasing its QoQ and YoY Q4 GDP figures. Currently, there is no forecast available, but as we can see from the previous readings, since Q2 2021, both QoQ and YoY readings have been on a decline.
Regarding other economic data releases on Thursday, the focus will fall on the US. The country will deliver its initial and continuing jobless claims numbers. Currently, the expectation for the initial ones is to go down from 248k to 235k. However, the continuing ones have increased slightly, going from 1539k to 1605k.
Also, the US will release its preliminary Q4 QoQ GDP figure. For now, it is believed that the number might have ticked up by a tenth of a percent from the previous one, going to +7.0%. If that’s the case, or if the actual reading shows up higher than expected, this may prove to be positive for the US dollar.
New home sales will also be carefully monitored, as the number has been on the up for the past couple of months. The current expectation is to decline from the previous 811k to 803k. That said, because of the potential rate hikes that the Fed is planning to introduce soon, the consumer might rush to secure mortgages at a slightly lower rate.
This does not mean that those mortgages would be primarily for new houses, but there is a good chance that people might opt to purchase new homes because of the ongoing government support when buying a new-built house.
Friday will kick off with Japan delivering its February Tokyo core and headline CPI readings on a YoY basis. There is no available forecast for the headline reading. However, the core one is expected to have grown to +0.4%, which would be double the number released last month.
Germany will take the spotlight during the European morning, as it will release its Q4 QoQ and YoY GDP figures. The current forecast is for the same numbers as previous.
The QoQ figure is believed to have remained at -0.7%, and the YoY one is expected to have stayed at +1.4%. However, if the actual readings show up better than expected, this may help strengthen the euro against some of its major counterparts.
However, the main spotlight might fall on the data we will receive later on from the US. We are talking, of course, about the core and headline PCE price index readings for January. Since 2012, the US Federal Reserve has used this measure when making its monetary policy decisions.
The core MoM PCE price index is believed to have stayed the same, at +0.5%. However, the YoY figure is expected to tick up by two-tenths of a percent, rising from +4.9% to +5.1%. For the headlines numbers, there is currently no forecast available.
From May 2020, the core and headline YoY readings continue to rise, but the growth has intensified around April of last year. The Fed is keeping a close eye on the readings because if they start getting out of hand, adjustments in the monetary policy would have to be made.