The US dollar showed some bounce last week, posting gains against other major currencies. Covid remains a major drag on economic growth, but there is light at the end of the tunnel, with the rollout of vaccine programs. In the US, the Biden stimulus plan was narrowly approved by the House of Representatives and faces its next hurdle in the Senate.
Eurozone headline CPI gained 0.9% and the core reading climbed 1.4% in January. This confirmed the original estimate. France, the second-largest economy in the eurozone, showed a 1.4% contraction in GDP in Q4 of 2020.
UK employment numbers were stronger than expected. Unemployment claims fell by 20 thousand, the first drop in three months. Wage growth continues to accelerate and hit 4.7% in December, up from 4.1%. The unemployment rate remained unchanged at 5.1%. At a parliamentary hearing, BoE policymakers said they did not expect inflation to shoot above the bank’s 2% inflation target.
In the US, Fed Chair Powell had a dovish message for the markets in his testimony before Congress. Second-estimate GDP for Q4 came in at 4.1%, revised upwards from 4.1%. There was positive news from Durable Goods reports, with strong acceleration in January. The headline read jumped 3.4% while Core Durable Goods rose 1.4%.
- German Prelim CPI: Monday, All Day. Germany’s CPI jumped 0.8% in January, its highest level since April 2019. However, inflation is expected to slow to 0.4% in February, with a forecast of 0.4%.
- Eurozone Manufacturing PMIs: Monday, 8:15 in France, 8:30 in Germany, and 9:00 for the whole eurozone. The German and eurozone manufacturing sectors remain well into expansionary territory. The second-estimate PMIs for Germany and the eurozone are expected to confirm the initial readings, with readings of 60.0 and 57.7, respectively. France, Spain and Italy are all projected to post readings above the 50-level, which separates contraction from expansion.
- US ISM Manufacturing PMI: Monday, 15:00. Manufacturing remains a bright spot in the US economy, as the PMI continues to post readings indicating strong expansion. The forecast for February stands at 58.7, unchanged from the previous release.
- Eurozone Inflation Report: Tuesday, 10:00. Inflation pressures have been accumulating in the eurozone. Headline CPI is expected to remain unchanged at 0.9%, while the core reading is projected to show a gain of 1.1%.
- Canada GDP: Tuesday, 14:30. Canada releases its GDP on a monthly basis. In November, GDP rose to 0.7%, up from 0.4% beforehand. However, the economy is expected to slow to 0.1% in December.
- US ISM Services PMI: Wednesday, 15:00. Services improved to 58.7 in January, its highest level since February 2019. No change is projected in the February release.
- UK Annual Budget Release: Wednesday, Tentative. The Chancellor of the Exchequer Rishi Sunak will present the new UK budget. This event, also known as the Spring Statement, will consist of new forecasts for the economy. The Covid vaccine campaign has gone very well, and the government has introduced a timetable to lift health restrictions. Any unexpected positive news in the budget will be bullish for the pound.
- US Employment Report: Friday, 13:30. Nonfarm payrolls are expected to improve to 133 thousand, after a weak gain of 49 thousand a month earlier. Wage growth is expected to remain unchanged at 0.2%.
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- USD/CAD forecast – Canadian dollar analysis
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