Next week, uncertainty will continue to dominate, while thanks to its close geographical proximity, the Eurozone is feared to be the most at risk from the fallout between the West and Russia. The ECB meets at a difficult time next week, and it will likely be a very heated discussion as even after all these years the different traditions at national central banks translate into conflicting views on the right reaction to the spike in headline inflation which will likely get much worse thanks to the fallout from the Ukraine war. Stagflation concerns are making the rounds, but pumping ever more cash into the system would, in our view, only make things worse. On top of all this, next week’s heavy dose of global data releases includes US and China Inflation and EU GDP.
Monday – 07 March 2022
- Trade Balance (CNY, GMT 02:00) – The trade surplus for China is expected to widen in February to $99.50bln from $94.46 bln in January.
- Retail Sales (EUR, GMT 10:30) – Retail Sales for Germany are expected to grow at 1.8% in January from a contraction at -5.5% m/m
Tuesday – 08 March 2022
- Gross Domestic Product (EUR, GMT 10:00)– GDP is the economy’s most important figure. Eurozone Q4 GDP is not expected to show anything new, with quarterly growth at 0.3% and headline at 4.6%. That leaves the Eurozone on course for low growth in Q4. There are still risks though, including from the surge in energy prices and Ukraine tensions, which in Europe could undermine energy supply and thus keep gas prices in particular elevated.
- Trade Balance (USD, GMT 13:30) – The trade deficit is expected to narrow in January to -$78.0 bln from -$80.7 bln in December that fell just short of the all-time wide gap of -$80.8 bln in September. We expect exports to grow 2.4% to $233.6 bln, while imports grow 0.9% to $311.6 bln.
- RBA’s Governor Lowe speech (AUD, GMT 22:15)
- Gross Domestic Product (JPY, GMT 23:50)– The preliminary Q4 GDP for Japan is expected unchanged at 1.3% q/q and headline at 5.4% y/y.
Wednesday – 09 March 2022
- Consumer Price Index (CNY, GMT 01:30) – Chinese inflation for February is seen steady at 0.4% m/m but headline is expected lower at 0.6% y/y from 0.9% y/y.
- JOLTS (USD, GMT 15:00) – The JOLTS Job Openings are expected slightly lower in January at 10.300 mln from 10.925 mln.
Thursday – 10 March 2022
- Event of the Week – Interest Rate Decision, Statement and Conference (EUR, GMT 12:45 & 13:30) –Clearly uncertainty is higher than before, but delaying policy normalisation even more would only add to the risk that the ECB’s extremely generous cash provisions are not just fuelling price pressures, but will also make it more likely that the crisis fuels wider unrest in the Eurozone’s societies. Against that background officials may be looking for a way to hike rates, but maintain a fallback option to keep spreads in. The flexibility of the PEPP program will be especially missed as the crisis will likely keep the ongoing fragmentation of the Eurozone in the spotlight. Keeping PEPP beyond the immediate crisis phase faces the difficulty that it may be challenged on the grounds that it violates the ECB’s mandate, which prohibits direct government financing. As such it may not be possible for the ECB to maintain an open PEPP envelope that can revive purchases if needed, but the mandate can be changed; if anything the current crisis has shown that political traditions can quickly be challenged and overthrown.
- Consumer Price Index (USD, GMT 13:30)– February is expected to show gains of 0.7% for the CPI headline and 0.6% for the core, following 0.6% gains for both in January. CPI gasoline prices look poised to rise 5.1% in February. As-expected February figures would result in a 7.8% y/y increase that would mark a 40-year high, versus last month’s 40-year high of 7.5%, as gains eclipse the prior cyclical peak of 5.6% in July of 2008. The headline gain would be a high back to the 8.4% rise in January of 1982. Core prices should post a new 39-year high y/y gain of 6.5% from a 39-year high of 6.0% in January. Widespread production bottlenecks are lifting all the inflation metrics, such as PPI and the trade price indexes.
- RBA’s Governor Lowe speech (AUD, GMT 22:15)
Friday – 11 March 2022
- Employment data (CAD, GMT 13:30) –Canada’s employment fell -200.1k in January following the -207.1k tumble in April, as Covid restrictions weighed on the labour market. The drop was larger than expected (we saw -80.0k). The jobless rate jumped to 6.5% from 6.0% (revised from 5.9%). Full time employment slipped -82.7k after a -6.1k drop. Part time positions saw a -117.4k drop following the 11.4k rise in December. The average hourly wage rate of permanent employees, a BoC favourite, rose 2.4% y/y after the 2.7% y/y rate of increase in December.