Little Meaningful Data to Start Week but Back End is Saturated
After little market moving data was released last week, event risk is higher in the five days ahead with data from the United States coming into focus. Elsewhere, growth data from Canada and the United Kingdom will be released, and inflation data from Europe’s largest economy should have a positive impact on volatility.
03/28 Tuesday // 12:00 GMT: EUR German Consumer Price Index (MAR P)
According to a Bloomberg News survey, inflation pressures in Germany are expected to have cooled in March, thereby diminishing the German argument for tighter monetary policies. Indeed, German officials have vocalized their beliefs on the European Central Bank’s bailout policies given the country’s long-standing fear of inflation. With the preliminary March reading expected to show a month-over-month reading of 0.3 percent (from 0.7 percent in February) and a year-over-year reading of 2.2 percent (from 2.3 percent), ECB officials could begin talking about more easing measures.
03/28 Wednesday // 12:30 GMT: USD Durable Goods Orders (FEB)
Despite a disappointing data print in January, February’s durable goods orders are forecasted to show a respectable rebound. The 3.7 percent contraction in January prompted fears of a snag in the United States’ recovery after a robust fourth quarter. With personal spending increasing by 0.6 percent in February and the labor market having the strongest six months of job growth since 2006, the 3.0 percent growth forecast for durable goods in February is very reasonable. Considering that equity markets and the U.S. Dollar haven’t been as negatively correlated as they historically have been the past few years, a strong reading could prompt a rally by both U.S. markets and the world’s reserve currency.
03/29 Thursday // 07:55 GMT: EUR German Unemployment Change (MAR)
Typically an overlooked release, the German unemployment report for March could be more market moving than usual. In the fourth quarter, Germany’s economy contracted by 0.2 percent and the labor market has struggled in the early part of 2012. Although the German unemployment rate is sitting at its lowest level in the past two decades, March’s figures are expected to show that jobs have been subtracted from the economy for the fourth time since November. If concerns over Germany start to arise, market volatility will likely increase in tandem, as without Germany, the Euro-zone would be much less stable than it is at present time.
03/29 Thursday // 12:30 GMT: USD Gross Domestic Product (4Q T)
Thursday’s economic docket offers a reboot of some figures previously released, but they are very much worth paying attention to. The final reading of fourth quarter growth in the United States is forecasted to confirm the previously reported 3.0 percent reading. This would be the first quarter of growth of 3.0 percent or more since the second quarter of 2010. Similarly, the prior personal consumption print of 2.1 percent is expected to stick.
However, it is the core personal consumption expenditure (core PCE) print that is the most important for longer-term trends in the U.S. Dollar and equity markets. As per the Federal Open Market Committee’s January meeting, Federal Reserve officials are noting the core PCE as the main inflation gauge used to measure price pressures. With the quarterly reading expected to show a mere 1.3 percent rise, Fed officials have at least once piece of data they can point to that gives scope to further easing. If subsequent releases show a muted core PCE, I fully expect the Fed to unveil another round of quantitative easing, likely before June.
03/16 Friday // 12:30 GMT: CAD Gross Domestic Product (JAN)
On Friday, Canadian monthly growth figures are due, with the JanuaryGDP reading forecasted to show modest growth of 0.5 percent. According to a Bloomberg News survey, on a year-over-year basis, growth is expected to have gained at the pace. It is worth noting that Canada’s largest trading partner, the United States, has seen a significant improvement in economic data over the past few months, and that could roll over to more imported goods from Canada (I believe this is part of the reason for the projected uptick in Canadian growth). If Canadian growth prospects are indeed improving, expect the Loonie to find bids.
Rate Hike Probabilities / Basis-Points Expectations
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--- Written by Christopher Vecchio, Currency Analyst
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