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Market participants are gearing up for a flurry of economic data, particularly from the United States, as we step into the final week of February, with a keen eye on the Market Week Ahead. After a relatively quiet period on the economic front last week, this week promises to be filled with significant releases that could sway market sentiment and influence trading decisions across various asset classes. Let’s delve into what the markets will be watching closely in the coming days.
Highlights:
- US Data in Focus: The US Consumer Confidence Index, Core PCE Price Index, and ISM Manufacturing PMI are key data points to watch.
- Europe Eyes Inflation: Eurozone flash inflation data is anticipated to show a slight decline. Rate cuts are expected, mirroring the US, with the first cut likely in June.
- Asia Pacific Update: Australian CPI and RBNZ rate decision are on tap. Inflation is expected to inch up slightly, while the RBNZ is likely to hold rates steady. However, any surprises could impact the New Zealand dollar.
Market Week Ahead: US Data in the Spotlight
The focus in the United States will be on several key data points. On Tuesday, all eyes will be on the Consumer Confidence Index, scheduled for release at 3:00 pm GMT. Analysts anticipate an improvement in February, driven by factors such as easing inflationary pressures and robust employment figures. Additionally, Thursday will see the unveiling of the Core Personal Consumption Expenditure (PCE) Price Index data at 1:30 pm GMT. Expectations suggest a mixed bag, with forecasts indicating a 0.4% increase between December 2023 and January, along with a potential easing in year-over-year core PCE inflation to 2.8% from January’s 2.9%.
Friday will bring the release of the US ISM Manufacturing Purchasing Managers’ Index (PMI) at 3:00 pm GMT. While markets aren’t expecting significant movement in the headline figure for February, any surprises could lead to heightened volatility. Recent PMI data has shown encouraging signs, with the manufacturing sector experiencing a notable upturn in health. Any positive deviation from expectations could bolster demand for the US dollar, while softer-than-expected figures may exert downward pressure.
In terms of Federal Reserve rate expectations, futures and OIS curves are aligning more closely with the Fed’s projections of three rate hikes this year, with around 83 basis points of easing priced in for the year. Currently, there’s approximately a 50/50 probability of a 25 basis point rate hike at the June meeting.
Developments in Europe
Turning our attention to Europe, Friday will see the release of the flash estimate for euro area inflation at 10:00 am GMT. This report will be closely scrutinized to gauge whether inflation is on track to meet the European Central Bank’s (ECB) 2% target. Economists’ estimates suggest a slight slowdown in year-over-year headline inflation to 2.5% in February, down from January’s 2.8%. Core inflation is also expected to ease to around 3.0% year-over-year amid improved supply conditions and weakened demand.
Rate pricing in Europe mirrors that of the US, with around 90 basis points of easing priced in for the year. The first 25 basis point rate cut is anticipated at June’s policy-setting meeting.
Asia Pacific Markets
The Market Week Ahead In the Asia Pacific region: attention will be on Australian CPI inflation data, set to be released on Wednesday at 12:30 am GMT. Analysts expect a slight uptick in the year-over-year inflation measure to 3.5% in January, up from 3.4% in December 2023.
Following this, the Reserve Bank of New Zealand (RBNZ) will announce its decision on the Official Cash Rate at 1:00 am GMT. Markets are pricing in a 70% probability of the central bank maintaining the rate unchanged at 5.50%, consistent with its stance in recent meetings. However, any deviation from expectations, especially a surprise rate hike, could lead to significant movements in the New Zealand dollar (NZD).
Conclusion
As we navigate through the market week ahead, market participants will closely monitor a plethora of economic indicators across different regions. From US consumer sentiment to euro area inflation and central bank decisions in the Asia Pacific, each release has the potential to impact market dynamics and shape investor sentiment. With uncertainty lingering amid geopolitical tensions and inflationary concerns, traders will remain vigilant for any developments that could steer the direction of global markets.
