- Biden stimulus to make progress in the House
- UK to ease lockdown after vaccine success
- India GDP in focus on Friday
Rising Yields Spook Investors
Fed Chair Jerome Powell's appearances in Congress this week may come at the perfect time. Rising yields have made investors nervous and the Fed Chair may be the person to put their minds at ease. Meanwhile, UK Prime Minister, Boris Johnson, will lay out plans for the easing of the lockdown measures in the UK.
US
Wall Street’s main event of the week will be Fed Chair Powell's testimony on Capitol Hill. Powell will have two days to answer questions on the Fed’s dovish strategy and at what point rising Treasury yields pose a risk to the recovery. Another disappointing weekly jobless claims figure points to a weak February payrolls |report and that should keep the Fed on autopilot in the short-term.
House Democrats are planning to move President Joseph Biden’s COVID-19 relief bill forward with a vote. Expectations are still high for conservative Democrats to support the Bill’s passing in the Senate by mid-March. The price tag of the Bill might come down and it seems unlikely the minimum wage hike to $15 will get enough support.
EU
A sluggish start to the vaccine rollout in Europe may explain some of the softer services PMI readings the past week and will likely contribute to a slower reopening in the months ahead. Still, restrictions are working as vaccines are rolled out and COVID-19 numbers are improving and that should continue to see rising optimism in the coming months.
The data this week is tier two and three, including final CPI for the euro area, German GDP, Gfk and Ifo surveys, and French GDP.
UK
The impressive vaccine rollout has traders optimistic about the outlook for the recovery this year. The economy has been among the worst hit by the pandemic but the UK has been among the most successful in rolling out the vaccine which should enable it to reopen soon. UK PM Boris Johnson is due to announce reopening plans on Monday starting with schools.
PMIs were vastly improved but retail sales data highlighted how important it is to get the consumer economy booming again. The UK jobs report is the only notable release on Tuesday next week.
Turkey
USD/TRY is back below 7 after peaking above 8.5 in November; a sign of how far Turkey has come since replacing its central bank governor and finance minister. Traders are increasingly confident in the central bank—under the leadership of Naci Ağbal, President of the Central Bank of the Turkish Republic—to stay the course and not buckle under political pressure.
China
PBOC continues to maintain USD/CNY fixing around 6.4500 while withdrawing liquidity domestically. Asia FX will remain stable while this continues.
China 1 and 5-year Loan Prime Rate decision Monday. It would be a huge surprise if they hiked and would be a strong negative for equities, positive CNY. Quiet data week otherwise. Geopolitical front is relatively quiet.
India
India GDP in focus Friday, expected to moderate to -4.5-5.0% YoY. Better numbers, equities positive.
The Indian rupee continues to appreciate breaking long-term support at 72.75. The Reserve Bank of India may become more aggressive in currency intervention now to slow appreciation.
Australia and New Zealand
The RBA minutes were very dovish but the currency and equities are at the mercy of movements on Wall Street. Commodity prices remain very firm, particularly base metals, limiting the downside on both. Slow week data-wise.
Reserve Bank of New Zealand rate decision on Wednesday. The RBNZ will remain unchanged at 0.25% but markets will be focusing on the statement. The RBNZ may signal that NZ has seen the best of its post-COVID-19 recovery until borders open, or signal that monetary policy might tighten sooner than expected. The later scenario will see NZD/USD spike sharply and be negative for equities.
Japan
Tokyo CPI, Japan Industrial Production and Retail Sales all released on Friday. In line with PMI readings they are expected to show that export sector recovery continues, but inflation and domestic recovery remain weak.
The BoJ has signaled that it will continue buying ETFs as needed and has no intention of selling any. That pushed the Nikkei through 30,000 and should continue this week depending on developments on Wall Street.
The rise in US 30-year yields sparked an aggressive rally by USD/JPY above 106.00 this week. That has since partially been corrected but highlights the sensitivity of USD/JPY to US/Japan rate differentials. Another move higher by US 10-year and 30-year bonds this week could see the USD/JPY spike higher to 107.00. USD/JPY is maintaining the breakout of its 9-month falling wedge suggesting higher levels ahead anyway.
Key Economic Events
Saturday, February 20th
- International Atomic Energy Agency Director General Grossi visits Tehran with hopes of salvaging 2015 nuclear deal.
- Thailand Prime Minister Prayuth Chan-Ocha faces no-confidence vote
Sunday, February 21st
- European Commission President von der Leyen speaks about a “Green New Deal”
Monday, February 22nd
- EU foreign ministers meet to consider new sanctions on Russia over the imprisonment of Alexey Navalny.
- ECB President Christine Lagarde speaks at the European Semester Conference.
- Riksbank Deputy Governor Martin Floden presents his view of monetary policy and the economic situation.
- US Treasury Secretary Yellen speaks at the New York Times DealBook conference
- BOE policy maker Vlieghe speaks on the economic outlook.
Economic Data
- US leading index
- Japan PPI services
- Thailand trade
- Germany Feb Ifo business expectations: 91.8 estimate v 91.1 prior
- Hong Kong CPI
Tuesday, February 23rd
- Iran may curb cooperation with nuclear watchdog inspectors that were agreed upon with the 2015 nuclear deal.
- Fed Chair Powell delivers the central bank’s semi-annual monetary policy report to the Senate Banking Committee.
- EU European Affairs ministers meet in Brussels to discuss relations with the U.K.
- EU antitrust chief Vestager will speak on digital regulations at the European Parliament.
- Bank of Canada Governor Macklem speaks
- Riksbank Deputy Governor Breman speaks about monetary policy and bank’s mandate
- International Petroleum Week
Economic Data
- US FHFA house price index, Conference Board consumer confidence, S&P CoreLogic Case-Schiller home prices
- UK Unemployment
- Sweden Unemployment
- Poland Unemployment
- South Africa Unemployment
- New Zealand retail sales
- China new home prices
- Singapore CPI
- Hungary rate decision: Expected to keep interest rates unchanged at 0.60%
Wednesday, February 24th
- Fed Chair Powell testifies before the Congress House Committee on Financial Services on monetary policy and the economy
- South Africa’s Mboweni presents budget
- Hong Kong presents annual budget
- EIA crude oil inventory report
- BOE Chief Economist Haldane speaks
Economic Data
- US new home sales
- Mexico retail sales
- Germany GDP
- Hong Kong GDP
- New Zealand rate decision: Expected to keep Official Cash Rate unchanged at 0.25%
- Russia CPI
Thursday, February 25th
- EU leaders begin two-day on travel restrictions and COVID-19 vaccine strategy
- A wrath of Fed speak, Atlanta Fed President Bostic speaks at a banking conference. St. Louis Fed President Bullard discusses monetary policy. New York Fed President Williams takes part in a panel. Fed’s Quarles discusses Stress Tests
- ECB Vice President de Guindos speaks at an online session of the IESE Alumni Learning Program organized by IESE Business School.
Economic Data
- US initial jobless claims, durable goods, second reading of Q2 GDP, pending home sales
- Mexico unemployment, GDP, central bank meeting minutes
- Eurozone Consumer confidence
- New Zealand ANZ business confidence
- Australia private capital expenditure
- Thailand BoP, trade
- Japan leading index
- Hong Kong trade
- Russia gold and foreign reserves
Friday, February 26th
- Finance ministers and central bankers from the Group of 20 will meet virtually
- The US House of Representatives are expected to have its first floor vote on President Biden’s $1.9 trillion stimulus package.
- ECB Executive Board member Schnabel speaks at European Fiscal Board conference.
- BOE Deputy Governor Ramsden speaks for the Institute of Chartered Accountants
Economic Data
- US personal income/spending, wholesale inventories, MNI Chicago PMI, University of Michigan sentiment
- Canada industrial product price
- New Zealand ANZ consumer confidence, trade
- Australia private sector credit
- Japan industrial production, housing starts, retail sales
- France GDP
- Switzerland GDP
- Sweden GDP
- Iceland GDP
- Poland GDP
- Denmark GDP, unemployment
- Singapore industrial production
- Turkey Trade balance
- Norway Unemployment
- Hungary Unemployment
- France CPI
- South Africa money supply, trade balance
Sovereign Rating Updates
- Denmark (Fitch, S&P)
- Ireland (Fitch)
- Ukraine (Fitch)
- EFSF (Moody’s)
- ESM (Moody’s)
- France (Moody’s)
- Portugal (DBRS)