Market movers ahead
Market focus next week is set to be primarily on US data and any news from the Donald Trump administration. In our view, political developments in France will also be followed closely.
In the data calendar, we expect US retail sales to indicate that private consumption got off to a great start in 2017. CPI inflation is likely to spike higher, driven primarily by higher energy and food prices, while we expect yearly core inflation to fall slightly. Markets are also likely to follow Janet Yellen's semi-annual monetary policy testimony to congress closely, as we did not get any major news from the last FOMC meeting.
In the euro area, we expect a solid German GDP print but think ZEW expectations are set to fall. We believe UK CPI data will attract a lot of attention given last year's GBP depreciation. Also due are the UK labour market report and retail sales.
Chinese inflation data is up - focus is primarily on the producer price index (PPI).
In the Scandies, Swedish inflation and the February Riksbank meeting dominate the calendar. In Norway, the week's sole important event is the central bank governor's annual address. The Danish GDP indicator for Q4 is also due for release.
Global macro and market themes
A moderate China slowdown is set to weigh on the global cycle.
Our models support the view that the growth acceleration period will be over soon.
Headline inflation is also close to a peak, as the base effects of oil reverse following January.
The above factors should support bonds short term but we look for another leg higher in yields later this year.
Policy uncertainty is set to weigh on euro assets in coming months.