The US dollar had a wobbly week amid geopolitical tensions and OK US data. What’s next? The upcoming week consists of US retail sales and housing data, and also a rate decision in Canada, Australian jobs, and more. Here are the highlights for the upcoming week.
Syrian airstrikes: After markets closed, the US, the UK, and France attacked Syrian installations related to chemical weapons. The attack was surgical and avoided hitting Russian soldiers. Nevertheless, Russian President Vladimir Putin called them an act of aggression and tensions still run high. Many other countries are involved, most prominently Iran and Israel which have also clashed around Syria.
US inflation came out as expected: 2.4% on the headline and 2.1% on the core. Nevertheless, this is a significant rise that may imply another rate hike this year. Geopolitical tensions around Syria pushed oil prices higher but trade tensions waned as China and the US exchanged pleasantries and negotiations are the way. In the euro-zone, mixed messages from the ECB helped the euro recover while weak British manufacturing production only slightly hurt the pound. Commodity currencies enjoyed the optimism on trade.Updates:
- US Retail Sales: Monday, 12:30. Consumption is a very significant part of the US economy and consumers have been holding back some spending of late. In the past two months, headline consumption fell short of expectations. They rose by 0.2% in February. Core sales fared even worse with slides of 0.1% in the past two months. Bounces are likely now: 0.4% on the headline and 0.2% on the core.
- Chinese GDP: Tuesday, 2:00. The world’s second-largest economy publishes its final GDP read quite early after the quarter ends and many suspect the data may be inaccurate. This will be the first read for Q1. The annualized growth rate in Q4 2017 was 6.8%, in line with the goals of the government. A repeat of this figure is projected for Q1 2018.
- UK jobs report: Tuesday, 8:30. The last jobs report was quite mixed. Wages rose by 2.8% y/y in January but the Claimant Count Change rose by 9,200 in February, worse than expected. The unemployment rate reverted back to 4.3% in January and that is unlikely to change in the report for February. The focus remains on the wages: the ongoing acceleration in pay implies a growing case for a rate hike in May. A rise to 3% is expected. However, another rise in jobless claims could trigger worries: an increase of 13.3K is forecast.
- US housing data: Tuesday, 12:30. Building permits stood an annualized pace of 1.30 million in February while housing starts lagged behind with 1.24 million. In order to have a meaningful impact, both figures need to go in the same direction and this is not always the case. In many occasions, the figures offset each other. Building permits are expected to rise to 1.33 million while housing starts carry expectations.
- John Williams talks Tuesday, 13:15. Currently, the President of the San Francisco Fed, Williams was nominated as the President of the New York Fed, a powerful role which is the de-facto No. 2 at the institution. Williams has expressed growing optimism on the economy. In his speech in Madrid, he may provide hints that the Fed is leaning towards four hikes in 2018 given higher inflation and other measures. Other Fed officials also speak during the week, but this discourse is the most important one.
- UK inflation: Wednesday, 8:30. Britain publishes key data day after day. Inflation slowed down to an annual pace of 2.7% in February, off the edge of the 1-3% range that is mandated by the Bank of England. The same level is expected for March. The stronger pound has pushed prices of imported goods lower. Another slowdown could be seen in the data for March. Core CPI was at 2.4% (2.5% projected now) while the PPI Input fell by 1.1% m/m back then (+0.4% expected now).
- Canadian rate decision: Wednesday, 14:00. Bank of Canada Stephen Poloz said that the country may see higher growth without triggering inflation. However, inflation did surprise to the upside. The BOC is expected to leave rates unchanged at 1.25% in this April meeting, putting the focus on the new forecasts and the press conference. With contradicting forces moving the economy and the currency, the level of uncertainty is high.
- Australian jobs: Thursday, 1:30. Australia has seen a moderate increase in jobs back in February: 17.5K, in line with estimates. The unemployment rate stood at 5.6%. RBA Governor Phillip Lowe said that interest rates are unlikely to change anytime soon, but changes in the labor market will undoubtedly have an impact. Expectations are slightly higher this time: a gain of 20.3K jobs and an unemployment rate of 5.5%.
*All times are GMT
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