- US inflation data seems to be the most important macroeconomic reading this week
- Oil prices recovered from their February slump, this week DoE report could draw yet more attention
- Not just the data in the spotlight, beware of a trade war unfolding
Last week was technically about central banks – we had 3 important meetings but ultimately the US president stole the show. The US Fed increased interest rates as expected but vague outlook from the new chairman Jerome Powell left the US dollar weakened. The Bank of England did not change rates but by pointing at a hike in May it maintained a positive trend for GBP. However, president Trump injected a fresh wave of anxiousness into the markets by announcing trade barriers that will target China.
As far as the Monday’s economic calendar is concerned there are not too many releases of note. The sole one worth looking at seems to be the Chicago Fed activity index for February (1:30 pm BST) which is forecast to come in at 0.25 points making a slight increase from 0.12 points registered a month earlier. The data tends to be a good predictor ahead of Chicago PMI. What to watch for the remainder of the week?
Trade wars (full week): Investors cannot focus just on the data and reports these days as the major market moves might be caused not by reports but by politics. Markets can be right to be concerned about the impact of trade barriers – even if actual barriers are not high, a surrounding uncertainty may hurt business confidence and affect growth. It may take weeks before the final list of tariffs is announced which is a good thing because it may help water it down but also a bad thing because it could affect economic confidence. Investors on equity and FX markets will have to navigate those waves of changing sentiment until we get more clarity on direction. Affected markets: DE30, US30.
US PCE data (Thursday, 1:30pm GMT): Inflation and wages are the most important report from the US right now. The Fed and markets alike they know the growth is there, employment is there, confidence is there (at least for now). The question is: at which point will it bite into inflation and require additional monetary tightening? Although we have already had the CPI inflation release for February the Fed targets the PCE and with the CPI in line with expectations even a minor change in the PCE could matter for the markets. Affected markets: USDJPY, US500.
Oil inventory data (Wednesday, 3:30pm GMT): Oil prices have fully recovered from the February slump thanks to a progress in rebalancing and concerns that firing Rex Tillerson could lead to new sanctions on Iran. The latest DOE report had a huge market impact as it showed an unexpected oil inventory draw against a seasonal pattern. The US oil inventories declined below the 5-year average as a result, a sign of normalization for many traders. Expect a lot of attention on the weekly report this Wednesday. Affected markets: OIL, OIL.WTI