The highlight of this week is likely to be the release of the US CPIs for February as investors look for more signs on whether a 4th Fed rate hike by year end is on the table. In the UK, Philip Hammond will present the first “Spring Statement”, while in Switzerland, the SNB decides on policy for the first time this year.
On Monday, we don’t have any major events or indicators scheduled on the economic agenda.
On Tuesday, during the Asian morning, we get the NAB business survey for February. Although this is usually a not-market affecting release, given the RBA’s emphasis on wage growth, we will take a close look to the Labour Costs Index of this report. When they last met, RBA officials reiterated that wage growth remains low and that this is expected to continue for a while yet, but what appeared interesting in our view, is that they said wage growth appears to have troughed, something that was not included in previous statements. In January, the Labour Costs Index accelerated to +0.9% qoq from +0.8% in December. Therefore, further acceleration may add validity to the RBA’s view, and could bring forth market expectations with regards to when the RBA may increase interest rates.
In the UK, Philip Hammond, the Chancellor of the Exchequer, will present the first “Spring Statement”, a mini-budget report that is taking the place of The Annual Budget, which has moved to Autumn. It will be mainly a response to the new fiscal and economic forecasts from the Office of Budget Responsibility. The interesting point of this event is that the OBR will also estimate the effect of Brexit divorce payments to the EU on the UK’s public finances.
From the US, we get CPI data for February. The headline rate is expected to have ticked up to +2.2% yoy from +2.1%, while the core one is forecast to have held steady at +1.8%. Although the market shrugged off January’s upside surprise, inflation remains on the front seat of concerns within the financial community. Let’s not forget that the market turbulence in early February was triggered by fears of inflation rising faster than previously anticipated, which could lead to faster rate increases by the Fed. What’s more, Powell’s hawkish remarks before Congress, which strengthened the case for a fourth hike this year, led to a similar market response, albeit to a much lesser extent.
Read the full financial markets weekly outlook on JFD Research.