- MON: EZ Economic Sentiment (Feb), US Durable
Goods (Jan), Japanese Retail Sales (Jan), German Prelim. CPI (Feb). - TUE: NBH Announcement, Canadian GDP (Q4), US
CaseShiller (Dec). - WED: Australian CPI (Jan) and GDP (Q4), Chinese
Official PMIs (Feb), Chinese Caixin Manufacturing Final PMI (Feb), EZ, UK, US
Manufacturing Final PMI (Feb), German Prelim CPI (Feb), US ISM Manufacturing
PMI (Feb). - THU: ECB Minutes, EZ Flash CPI (Feb) and
Unemployment Rate (Jan), Japanese Tokyo CPI (Feb). - FRI: Chinese Caixin Services Final PMI (Feb),
German Trade Balance (Jan), EZ, UK, US Services & Composite Final PMI
(Feb), EZ PPI (Jan), US ISM Services PMI (Feb).
Note: Previews
are listed in day-order
BoJ Governor
Nominee Ueda Upper House Appearance (Mon):
Japan’s House of
Councillors will conduct hearings on the government’s nominations for the next
BoJ leadership with the confirmation hearing for academic and former Board
member Kazuo Ueda to head the central bank to take place on Monday at 04:10GMT
(Sunday 23:10EST) and followed the next day by the hearing for the Deputy
Governor nominees, which are former FSA Commissioner Ryozo Himino and BoJ
executive Shinichi Uchida. These hearings in the upper house follow the recent
proceedings at the House of Representatives, or lower house, which provided
some insight into BoJ Governor nominee Ueda’s thoughts whereby he noted that
current monetary policy is appropriate and that Japan still needs more time for
inflation to sustainably hit the 2% target level, while he added it is
appropriate to continue monetary easing from now on and suggested the BoJ would
either need to move towards monetary policy normalisation or must consider ways
to maintain YCC depending on if inflation improves significantly or not. As a
reminder, the choice of Ueda to succeed BoJ Governor Kuroda took markets by
surprise and initially spurred a hawkish reaction as would have been the case
for any pick other than Deputy Governor Amamiya who turned down an approach by
the Government, but was previously seen as the front runner and a continuation
candidate given that he was an architect of many of the BoJ’s current policies.
This initial hawkish reaction gradually faded after dark horse candidate Ueda
commented that the BoJ’s monetary policy is appropriate and that they need to
continue with easy policy, while he also previously warned against prematurely
unwinding Japan’s ultra-loose policy and was known for voting against lifting
the zero-interest rate policy in 2000 during his seven-year stint at the
central bank. Furthermore, Japanese press reported that Ueda’s selection was
likely based on his reassurance that the BoJ would not rush into a hasty exit
and his former staff secretary, during his time at the BoJ, Tetsuya Inoue, said
that Ueda is likely to allow the data to guide the exit timing. Meanwhile, the
comments from the Deputy Governor nominees at the lower house hearing were
uneventful as both Uchida and Himino conformed to the current BoJ thinking as
they noted current policy was appropriate and suggested the need to continue
with monetary easing for now. The confirmation hearings are widely seen to be
rubber stamp procedures given the ruling coalition’s dominance in parliament
where the LDP party alone have a majority in the lower house and along with
junior coalition partner Komeito occupy 145 of the 248 seats in the upper
house.
Canada GDP (Tue):
In the November GDP
update, StatsCan said growth was tracking “most likely flat” for December. RBC
says that implies a Q4 increase of around 1.6% in annualised rate terms, and
“that marks a slowing to around half the 3% average per-quarter increase over
the first three quarters of 2022,” the Canadian bank notes. In terms of the
policy implications, Canadian bank TD Securities writing after the recent CPI
data release, said that the BoC can argue that it was correct to signal a pause
in January as price pressures are softening, despite the robust jobs market
data, and the CPI should give the central bank the comfort that inflation is
tracking below its 5.4% projection from the January MPR. “The Bank is by no
means out of the woods, but barring a monstrous upside surprise on Q4 GDP, the
Bank should be able to hold the overnight rate at 4.50% in March and hope for a
deceleration in the growth figures by April.”
Australia CPI
& GDP (Wed):
Australian GDP for
Q4 is scheduled next week and will provide the latest insight into the health
of the economy and if there is a further impact on growth from the central
bank’s ongoing tightening cycle. As a reminder, the prior GDP data was weaker
than expected in Q3 as Q/Q growth slowed to 0.6% vs. Exp. 0.7% (Prev. 0.9%) and
the Y/Y figure also missed forecasts, but picked up pace from Q2 with an
expansion of 5.9% vs. Exp. 6.2% (Prev. 3.6%). Economic growth remained driven
by household spending and the Australian Bureau of Statistics also noted a
strong increase in wages and a rebound in dwelling construction, while the
annual rate of growth was helped by a lower base given that the economy had
contracted one year beforehand due to the COVID-19 Delta outbreak. These base
effects are also likely to be a factor in the upcoming GDP data for Q4 as there
was a firm rebound in the December 2021 quarter which could contribute to a
potential slowdown, while the data releases have been mixed as CPI in Q4 surged
to its highest level since 1990 to suggest a hot economy and Capital Expenditure
also topped forecasts, although Construction Work Done showed a surprise
contraction and directly feeds into the GDP data. Furthermore, ING previously
anticipated Q4 GDP growth to weaken to an annual rate of 2.5% and it also
forecasts 2022 GDP to expand by 3.6% before slowing to 1.9% this year. The GDP
data will also coincide with the release of the latest monthly CPI from
Australia which is likely to remain elevated given that inflation data hasn’t
shown any signs of slowing down yet after CPI YY in December rose to 8.4% vs
Exp. 7.6% (Prev. 7.3%) and Q4 CPI Y/Y climbed to 7.8% vs. Exp. 7.5% (Prev.
7.3%) for the fastest pace of increase in more than 3 decades.
China Official PMI
(Wed):
The NBS
Manufacturing PMI is seen moving back into contraction territory at 49.8 in
February from January’s 50.1. There are currently no expectations for the
Services and Composite metrics – which last month printed at 54.4 and 52.9
respectively. Last month’s release was one of the first since China loosened
its COVID measures, albeit sentiment in the diffusion index could’ve been
impacted by the week-long Lunar New Year holiday. The January release saw all
three NBS metrics move into expansion, with the report suggesting that the
release may have seen some Lunar New Year-induced tailwinds from demand in the
manufacturing industry and consumer sectors. As a reminder, in late January,
Chinese Premier Li said China will consolidate and expand the momentum of its
economic rebound, whilst accelerating consumption recovery and stabilising
foreign trade and investments. Premier Li also said China needs to step up
efforts to deliver on policies for the expansion of consumption. “Solid steps
will be taken to ensure the effective implementation of the policy package for
stabilising the economy and its follow-up measures. Key projects and equipment
upgrading and renovation supported by fiscal and financial policy tools will be
advanced to generate more physical gains” according to Chinese state news CGTN.
US ISM Manufacturing
PMI (Wed):
The consensus is
for the manufacturing ISM to improve a touch to 47.7 in February vs 47.4 in
January. Credit Suisse is against that consensus view, and sees the index
slipping to 47.0; the bank writes that although “momentum in the manufacturing
sector is improving, the ISM has been a positive outlier, and likely has
further room to fall before a modest rebound in the spring.” The bank notes
that the S&P Global PMI data series and several Fed regional manufacturing
surveys have stabilised recently, but the headline ISM will still be dragged
lower by the production, employment and supplier delivery components. Ahead,
the bank is more optimistic, and looks for the new orders component to bounce
off the post-pandemic low of 42.5 seen in the January data. “US industrial
production momentum is currently at a deep trough, and we expect a rebound in
the months ahead,” CS writes, “some improvement in ISM new orders is likely
this month, followed by a broader stabilisation in manufacturing surveys.” That
said, it expects growth will remain sub-trend, with tighter financial
conditions and poor sentiment limiting demand, and adds that elevated
inventories will be a headwind for manufacturers.
ECB Minutes (Thu):
As expected, the
ECB delivered another 50bps hike to the deposit rate and reaffirmed its
tightening intentions by stating that it expects to unveil another 50bps
adjustment in March. Lagarde stated that this is warranted on account of
underlying inflationary pressures, fiscal measures and wage growth. At the March
meeting, the ECB stated it will evaluate the subsequent path of its monetary
policy. On the balance sheet, the ECB announced that reinvestments will be
allocated proportionally to the share of redemptions across each constituent
programme of the APP. At the follow-up press conference, Lagarde stated that
the Bank’s economic assessment sees risks to the economic outlook and inflation
as “more balanced”. In terms of the decision itself, Lagarde says there was a
“large consensus”, adding there was a discussion on communication, but not full
agreement; any clarity on the extent of the disagreement will be of note to the
market. For the policy path going forward, Lagarde noted that the ECB will not
be at peak rates in March and there will most likely be ground left to cover;
this suggested that hopes for a pause in May could be disappointed.
Furthermore, Lagarde attempted to stress the longevity of reaching terminal by
stating that when the level is reached, rates will need to stay there. As
always, the account of the meeting will be viewed in many quarters as being
“stale”, particularly as the March meeting and accompanying macro projections
are expected to set the course for monetary policy in the Eurozone for H1.
EZ Flash CPI (Thu):
Expectations are
for February’s headline Y/Y HICP to fall to 8.1% from 8.6%, but with the
super-core reading seen remaining steady at 5.3%. Recent releases have seen
analysts focus on the diverging trends of headline and core inflation with the
former continuing to fall whilst the latter continues to rise and currently
sits at an all-time high for the Eurozone. The January figures continued to
point to “higher non-energy industrial goods inflation while services inflation
remained steady, rather than easing”, according to Oxford Economics. For the
upcoming release, ING highlights that energy price developments should bring
down the headline rate, but core inflation will remain the main concern. ING
adds, “we have heard from European Central Bank officials that they see the
peak in underlying inflation still ahead, so an unchanged rate is probably the
best one can expect next week”. In terms of the policy implications, the desk
notes that a “ sticky core rate means no relief for central bankers and thus
also little reason for markets to budge from their pricing of 125bp of further
rate increases from the ECB”. ING cautions that given how far the EUR front-end
pricing has already evolved, the further upside appears limited for now with
even the ECB hawks already ‘out-hawked’ by the market.
Japan Tokyo CPI
(Thu):
Tokyo Core CPI Y/Y
is expected to have marginally cooled to 4.2% in February from January’s 4.3%
rate. The metric is usually used as a bellwether to the Nationwide figure,
although analysts have been highlighting that the timelier Tokyo CPI has slight
discrepancies versus the National figure due to different weightings of gas
prices between the two series. As a reminder, last month’s Tokyo release saw
Core CPI rise to a 41-year high after outpacing forecasts for four straight months.
At the time, the JPY saw immediate strength following the release as inflation
data is closely watched at a time the BoJ is expected to make a hawkish pivot,
with CPI inflation at twice the BoJ’s annual target of 2%.
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