The Economic Week Ahead

Main Macro Events This Week

It’s been a tense and contentious March for the markets, as economic and political uncertainties play tug-o-war with prices. Signs of rising global growth, but still tame inflation, are helping underpin confidence, though worries over U.S. tariffs and fears of a deleterious trade war, along with concerns over a more hawkish FOMC stance, have left equities heavy on the month, while longer dated bond yields are mostly lower.

United States: U.S. markets will focus on the FOMC meeting (Tuesday, Wednesday), Chairman Powell’s debut. There shouldn’t be any surprise with respect to the rate decision. A 25 bp tightening in the funds rate band to 1.50% to 1.75% is as sure a bet as there can be. Meanwhile, the potential for another government shutdown looms on Friday as the House and Senate debate a spending bill. Fedspeak will mostly be crowded out by the FOMC meeting and the accompanying blackout period.

Data is on the thin side. Housing and manufacturing reports dominate the light calendar. February existing home sales (Wednesday) are expected to rebound 1.9% to a 5.480 mln pace, recovering somewhat from the 3.2% January drop to 5.380 mln and December’s 2.8% decline to 5.560 mln. Sales were as high as 5.720 mln in November, the highest in a decade. Risk is to the downside, however, giving lean inventories and rising mortgage rates. New home sales (Friday) are estimated increasing 2.9% to 0.610 mln in February, after dropping 7.8% to 0.593 mln. Risk is also to the downside here given weak secondary market measures. The January FHFA home price index is on tap (Thursday). Durable goods orders (Friday) for February are projected bouncing 1.5%, unwinding some of the 3.6% January drop. Other data this week includes the Q4 current account (Wednesday), the Markit manufacturing and services PMIs (Thursday), and February leading indicators (Thursday).

Canada: the week brings the final inputs to the January GDP projection and an appearance by a BoC official. January wholesale trade (Tuesday) is expected to rise 0.1% after the 0.5% decline in December. January retail sales (Friday) are seen rebounding 1.0% in January after the 0.8% drop in December. The ex-autos retail sales aggregate is projected to rise 0.8% after a 1.8% plunge. The CPI (Friday) is expected to grow 0.3% m/m in February after the 0.7% jump in January. A 1.8% y/y growth pace is projected for the CPI during February following the 1.7% y/y growth rate in January. Bank of Canada Senior Deputy Governor Wilkins speaks (Thursday) at the Rotman School of Management in Toronto.

Europe: it’s a busy and important week for the Eurozone with an almost full round of confidence numbers taking center stage on the data front, while the European Council on March 22/23 is expected to set out the EU’s guidelines for the future relationship with the U.K., but also address Trump’s tariff plans. Confidence readings are expected to come down further, but will still remain at high levels, and are unlikely to deter the ECB from moving slowly but steadily toward the exit from its still very accommodative stance. Geopolitical risks could slow an already cautious move further, and on that front, the EU leader summit at the end of the week will be watched very carefully as the EU is expected to agree on draft guidelines for Brexit negotiations and both sides are hoped to finalize a transition agreement, while Trump’s tariffs plans are also on the agenda.

The highlights of the data calendar, meanwhile, are ZEW, PMI and Ifo readings, which expected to correct further from recent highs. German ZEW investor confidence (Tuesday) is the most forward looking, but also least reliable of the bunch. The March Eurozone manufacturing PMI (Thursday) is seen slipping back to 58.2 from 58.6 and the services reading to 56.0 from 56.2, which should leave the composite at 56.9, down from 57.1 in February, but still pointing to a healthy pace of expansion across both sectors. Similarly, the German Ifo (Thursday) is expected to correct to 114.9 in from 115.4, but taking a longer perspective that would still be a strong number. Indeed, with PMIs surveys showing for a while now that companies are running into capacity constraints, a slowdown in growth momentum is inevitable at some point, but does not necessarily mean that the ECB has to keep pumping cash into the economy.

UK: The BoE’s Monetary Policy Committee gathers for its March meeting (announcing Thursday). It is likely to be a non-event for markets following the February meeting and quarterly Inflation Report update, with the repo rate widely expected to be left unchanged at 0.50%, and with QE totals also more than likely to remained unaltered. Data this week includes February inflation data (Tuesday), monthly labor market figures (Wednesday), monthly government borrowing, the March CBI industrial trends survey (Wednesday) and official retail sales for February (Thursday).

Japan: The markets will be on holiday Wednesday for Vernal Equinox Day. The January all industry index (Thursday) should fall 1.5% m/m from the previous 0.5% increase, breaking a string of three monthly gains. A lot of the focus will be on the National February CPI numbers (Friday). CPI is penciled in at an unchanged 1.4% y/y pace overall, while the core should rise to 1.0% y/y from 0.9%.

Australia: the minutes to the Reserve Bank of Australia’s March meeting are due (Tuesday). The February employment report (Thursday) is expected to reveal a 15.0k gain after the 16.0k rise in January. The unemployment rate is projected to hold steady at 5.5%. The housing price index (Tuesday) is expected to contract 0.7% in Q4 (q/q, sa) after the 0.2% dip in Q3. RBA Assistant Governor (Financial System) Bullock appears in a panel at the ASIC Annual Forum 2018 in Sydney.

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