US economic calendar is chock-full today - BBH

Analysts at BBH suggest that US economic calendar is chock-full today and the weekly initial jobless claims may be of passing interest as they remain near cycle lows.  

Key Quotes

“Producer prices likely recovery from the softness in December, but not enough to prevent the year-over-year rate from declining.  The Empire and Philly Fed surveys offer earlier insight into February activity.  Later industrial production and manufacturing output will be reported.  The former is set to slow from a strong Q4 showing and a 0.9% increase in December.  The latter may have accelerated from the 0.1% increase at the end of last year.”

Then, late in the day, the Treasury International Capital (TIC) report will be released.  It covers the month of December.  We know from the Fed's custody holdings that foreign central banks that use this facility saw a $27 bln decline in December.  The two time series do not always line up, and the Fed data is weekly, not monthly.  We note that the Fed's custody holdings have completely recouped the December decline through the first week this month.”

“However, the data will likely be of tertiary concern.  The key is the stock market.  With yesterday's gains, the S&P 500 retraced 61.8% of the recent drop.  That objective is just shy of 2699.  It is set to gap higher currently.  Last Wednesday's high near 2727.7 is the next immediate target, though how the market performs around the gap may offer a tell.  Yesterday's high (~2702.1) becomes important support.   A push below it, which would encourage ideas of an exhaustion gap, would suggest the correction is over.  Many who had just discouraged investors from holding cash are now warning of a deeper and broader correction.”

The dollar is suffering broad losses.  The Dollar Index is within a stone's throw of the low set in late January (~88.44), which was the lowest level since late 2014.  The euro is testing its highs, and poked through $1.25 briefly in late Asia for slipping a little in Europe.  The dollar eased to JPY106.20, but has stabilized after the close of the Tokyo markets.  The rise of the euro and yen, not just against the dollar, but more importantly on a trade-weighted basis, may not be particularly desirable, but large current account surpluses and an American First agenda in Washington, prevent much official resistance.  We saw that in Japan's Finance Minister Aso's comments and in the silence of European officials.”

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