Following a thin economic docket last week, the final week of February will see a pick-up in data, particularly out of the US.

All in all, it will be a busy week for the markets.

US data in the spotlight

Stateside, Tuesday’s Consumer Confidence Index (released at 3:00 pm GMT) is expected to have improved in February, swayed by easing inflation and healthy employment. Thursday’s Core Personal Consumption Expenditure (PCE) Price Index data will also be interesting (released at 1:30 pm GMT), specifically after January’s CPI and PPI beats mid-month. Expectations, according to Bloomberg’s median estimate, however, indicate a mixed bag, calling for a +0.4% increase (prior: +0.2%) between December 2023 and January (Est Range: +0.5%/+0.2%) while the year-over-year median estimate suggests core PCE inflation to ease to 2.8% from 2.9% in January (Est Range: +2.9%/+2.6%).

The US ISM Manufacturing PMI should be one to watch on Friday at 3:00 pm GMT, albeit markets are not anticipating much change in the headline figure for February, expected to remain at around 49.1. Last week’s S&P Global PMI series saw manufacturing and services indexes remain in expansionary territory. The former rose to 51.5 in February, smashing estimates of 50.5 and comfortably beating the prior of the upwardly revised 50.7 reading for January, signalling the ‘sharpest upturn in the health of the goods-producing sector since September 2022’, with the report also adding that expansion was bolstered by a ‘return to output growth and quicker increases in new orders and employment’. Friday’s event is a key economic indicator and one of the first to be released in a calendar month and, therefore, can elevate market volatility considerably. Although the ISM manufacturing component has remained in contractionary territory since late 2022, we have seen gradual improvement in recent months. Any upside surprise here could boost USD demand; conversely, softer data may weigh.

In terms of Fed rate pricing, the futures and OIS curves are now far more aligned with the Fed’s projections of three rate cuts this year, both showing around 83bps of easing priced in for the year (little more than three rate cuts). As of writing, it is about a 50/50 bet for a 25bp cut for the June meeting.

Across the atlantic in Europe?

Across the Atlantic, the flash (prelim) estimate for euro area inflation will be released on Friday at 10:00 am GMT, a report that will be broadly monitored that will either support or dash hopes that inflation is enroute to its 2% inflation target. Economists’ estimates expect the year-over-year headline measure to be supportive and could encourage a dovish repricing; the median estimate indicates inflation to slow to 2.5% in February, down from 2.8% in January. Core inflation is also expected to cool year on year to around 3.0% from 3.3% over the same period amid healthier supply conditions and weakened demand. It is important to note that ahead of the euro area inflation release, we have regional inflation data to contend with that can help gauge what we’ll be looking at on Friday.

Regarding where the markets are in terms of rate pricing, it’s a similar picture to the Fed: around 90bps of easing priced in for the year, with the first 25bp rate cut looking like it will be at June’s policy-setting meeting.

Asia pacific markets

Aussie CPI inflation—the monthly CPI indicator—will also be one to keep an eye on this week on Wednesday at 12:30 am GMT. The consensus heading into the event suggests a slight uptick in the year-over-year inflation measure to 3.5% in January, up from 3.4% in December 2023.

The Reserve Bank of New Zealand (RBNZ) will make the airwaves shortly after at 1:00 am GMT. Markets (OIS) are pricing a 70% probability for the central bank to hold the Official Cash Rate unchanged at 5.50%, marking the central bank’s fifth consecutive no-change call. The last meeting at the end of November 2023 (the RBNZ only have seven meetings per year) maintained hawkish language and essentially was a hawkish surprise for markets amidst worries surrounding inflation; you may also recall that the RBNZ, unlike most global central banks who are on the doorstep of adopting an easing policy, communicated that if inflation were to come in hotter than expected, the central bank would likely need to tighten policy. Should a 25bp hike be seen next week (unlikely), we can expect the New Zealand dollar (NZD) to be bid; for any downside in the NZD, holding rates unchanged and abandoning hawkish communication would likely need to occur.

G10 FX (5-Day Change):

This material on this website is intended for illustrative purposes and general information only. It does not constitute financial advice nor does it take into account your investment objectives, financial situation or particular needs. Commission, interest, platform fees, dividends, variation margin and other fees and charges may apply to financial products or services available from FP Markets. The information in this website has been prepared without taking into account your personal objectives, financial situation or needs. You should consider the information in light of your objectives, financial situation and needs before making any decision about whether to acquire or dispose of any financial product. Contracts for Difference (CFDs) are derivatives and can be risky; losses can exceed your initial payment and you must be able to meet all margin calls as soon as they are made. When trading CFDs you do not own or have any rights to the CFDs underlying assets.

FP Markets recommends that you seek independent advice from an appropriately qualified person before deciding to invest in or dispose of a derivative. A Product Disclosure Statement for each of the financial products is available from FP Markets can be obtained either from this website or on request from our offices and should be considered before entering into transactions with us. First Prudential Markets Pty Ltd (ABN 16 112 600 281, AFS Licence No. 286354).

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD clings to daily gains above 1.0650

EUR/USD clings to daily gains above 1.0650

EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.

EUR/USD News

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.

GBP/USD News

Gold holds steady at around $2,380 following earlier spike

Gold holds steady at around $2,380 following earlier spike

Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.

Gold News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price shows no signs of directional bias while it holds above  $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research. 

Read more

Week ahead – US GDP and BoJ decision on top of next week’s agenda

Week ahead – US GDP and BoJ decision on top of next week’s agenda

US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.

Read more

Majors

Cryptocurrencies

Signatures