Most Important Economic Events of the Week 03.01.2021 – 03.07.2021
American stock indices ended the week with a decline. Despite the continued optimism and "persuasion" from the Fed leadership, investors and stock indices seem to have decided to take a break before storming new record levels.
Supported by growing yields on US government bonds, the dollar rose last week, despite extreme volatility caused by statements by Jerome Powell (the DXY dollar index rose 0.5% over the past week).
Federal Reserve Chairman Jerome Powell, speaking to Congress, said the central bank will continue to pursue soft policies until significant progress is made towards meeting its inflation and employment targets. In his opinion, it may take more than three years to achieve the target inflation rate of 2%, and during this time the Fed intends to maintain the parameters of the current monetary policy.
Powell’s statements indicate that he is not worried about rising government bond yields and heightened inflation expectations, and the central bank will allow inflation to even exceed the 2% target for a while before discussing policy tightening (annual inflation at the end of 2020 was 1.3%, staying below the Fed's target for the eighth consecutive year).
Next week, financial market participants will pay attention to the publication of important macro statistics for the US, Germany, Eurozone, Australia. However, their focus will be on the Australian central bank meeting, as well as the release on Friday of monthly US labor market data, which is critical (along with inflation and GDP data) for the Fed in making monetary policy decisions.
Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:
*) new events can be added to the calendar and/or some scheduled events canceled during the coming week
**) specified time – GMT
Monday, March 01
13:00 EUR Harmonized Consumer Price Index (HICP) in Germany (preliminary release)
This index is published by the EU Statistics Office and is calculated on the basis of a statistical methodology agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one weakens it.
Preliminary forecast for February: +1.6% (versus +1.6% in January, -0.7% in December and negative values in the second half of 2020) in annual terms. If the data turns out to be better than the forecast, the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data suggests that inflationary pressures are still low in Germany. The data is worse than the forecast and the previous value will negatively affect the euro.
15:00 USD Index (PMI) of business activity (from ISM) in the manufacturing sector of the US economy
The Institute for Supply Management (ISM) Manufacturing PMI is an important indicator of the health of the American economy as a whole. A result above 50 is seen as positive and strengthens the USD, below 50 as negative for the US dollar. Forecast: 58.9 in February (against 58.7 in January, 60.7 in December). The index value is above the 50 level, which may support the dollar in the short term. The data above 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and, especially, below the value of 50, the dollar may fall sharply.
16:10 EUR Speech by ECB President Christine Lagarde
During the speech by the head of the ECB Christine Lagarde, the volatility of trading not only in the euro and European stock indices, but throughout the financial market, especially if she touches on the topic of the ECB's monetary policy, increases. Any hints at curtailing the QE program in the Eurozone will cause the euro to rise. The soft tone of Christine Lagarde's speech and the propensity to continue the extra soft monetary policy of the ECB will negatively affect the euro.
Speeches of the head of the ECB after the bank's meetings have a particularly strong influence on the market. In previous periods, the speech of the head of the ECB in similar situations could cause a change in the euro rate by more than 3%. If Christine Lagarde does not touch upon the topic of the ECB's monetary policy, the reaction to her speech will be weak.
Tuesday, March 02
03:30 AUD RBA interest rate decision. RBA accompanying statement
In March 2020, the RBA made 2 rate cuts, bringing it to the level of 0.25%, and launched a quantitative easing program. At the same time, for 3-year government bonds of Australia, the target level of yield was 0.25%. The RBA has launched a program of lending to the banking system.
In early November 2020, RB of Australia lowered its key rate again, bringing it and the target 3-year bond yield to 0.10% from 0.25% and announced a quantitative easing program in the amount of A $ 100 billion to support the incipient economic recovery country.
“We live in extraordinary and difficult times”, said central bank governor Philip Lowe. In his opinion, "further stimulation is needed". He announced this during a press conference on March 19, 2020, when the RBA cut the interest rate during its unscheduled meeting.
The main negative factors for the Australian economy are weak wage growth, a weak labor market and a slowdown in growth. Annual inflation has remained below the RBA's target range of 2% -3% for four years.
Unemployment in the country remains above the 5% level for many years, unwilling to decline. Now the Australian economy is experiencing difficulties due to the coronavirus pandemic, which has hit the tourism and transport sectors hard.
It is expected that at this meeting the Central Bank of Australia will leave the rate at the current level of 0.1%, although unexpected decisions are not ruled out.
In an accompanying statement, RBA executives will explain the reasons for the rate decision. If the RBA signals the possibility of further easing of monetary policy in the near future, the risks of a further fall in the Australian dollar will increase.
07:00 EUR Retail sales in Germany
Retail sales are the main consumer spending indicator in Germany, showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast: -0.5% in January (+5% in annual terms) against -9.6% (+1.5% in annual terms) in December, +1.9% (+5.6% in annual terms) In November.
The data indicate a new decline in the indicator, including due to new lockdowns due to the coronavirus. The data release is unlikely to have a positive impact on the euro. Better-than-expected data is likely to have a positive effect on the euro, but in the short term.
10:00 EUR Consumer Price Index. Core CPI (Pre-release)
The Consumer Price Index (CPI) is published by Eurostat and measures the price change of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changing purchasing habits. A positive result strengthens the EUR, a negative one weakens it. In October, November and December 2020, the CPI fell by -0.3%, indicating low inflationary pressures and even slowing inflation. Forecast for February: +1.0% (in annual terms) against +0.9% in January. If the data turns out to be worse than forecast, then the euro may fall sharply in the short term. The data better than the forecast and / or the previous value may strengthen the euro in the short-term, despite the low value (the target level of consumer inflation by the ECB is slightly below 2.0%).
The Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy have been excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, while a low result weakens it. In January 2021, the core CPI rose by +1.4% (YoY) after more modest values of +0.2% between September and December 2020. If the data for February turn out to be worse than the previous value or forecast, then this may negatively affect the euro. If the data turn out to be better than the forecast or the previous value, then the euro is likely to respond with an increase in quotations, but only in the short term. Inflation in the Eurozone remains low, which is a negative factor for the euro. Forecast for February: +1.1%.
13:30 CAD GDP of Canada. Annual data on GDP of Canada
Canada's GDP report is published by Statistics Canada. Strong report will strengthen CAD. Weak GDP report will negatively affect CAD. The previous report pointed to the growth of GDP in Canada by 0.7% in November.
Canada's Quarterly GDP report reflects the total volume of all goods and services produced by Canada for the quarter (in annual terms) and is considered an indicator of the general health of the Canadian economy. In the previous (third) quarter, GDP grew by 40.5%. If the data for Q4 2020 turns out to be stronger, then the CAD will strengthen.
Forecast: +0.4% in December and +47.6% in the 4th quarter. This is a positive data for CAD.
Wednesday, March 03
00:30 AUD Australian GDP (Q4)
Australian Bureau of Statistics will report on the country's GDP, which is the main indicator of the state of the Australian economy, for the 4th quarter. Strong report will strengthen AUD. Weak GDP report will negatively affect AUD. Forecast: +2.5% (vs. +3.3% in Q3, -7.0% in Q2, -0.3% in Q1 2020). The growth of the indicator is a positive factor for the AUD. If the data turns out to be worse than the forecast, then the AUD will decline.
13:15 USD ADP Private Sector Employment Report
Typically, the ADP's private sector employment report has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The growth in the number of workers in the US private sector in February is expected to be 168,000 (versus an increase of 174,000 in January, a fall of 123,000 in December). The relative growth of the indicator may have a positive effect on the dollar quotes, while the relative decline in the indicator - negatively. Therefore, the market reaction may be negative, and the dollar may decline if the data turn out to be worse than forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. The bulk of the layoffs were concentrated in tourism and retail. Other important sectors of the economy were also affected. ADP previously reported that the most significant drop in employment was recently noted in the construction and financial services sectors.
Although the ADP report does not have a direct correlation with the official US Labor Department data, which will be released on Friday, the ADP report is often a harbinger of it, having a noticeable impact on the market.
15:00 USD Service PMI (from ISM) in the US economy
This indicator assesses the state of the service sector in the US economy. The service sectors (as opposed to the manufacturing sector) have practically no impact on the country's GDP.
In December this indicator came out with a value of 57.2, and in January 58.7. A result above 50 is seen as positive for the USD. However, a relative decline in the index could negatively affect the dollar in the short term. Forecast for February: 58.7, which is likely to positively affect the USD overall.
Thursday, 04 March
00:30 AUD Trade balance. Retail Sales Index
This indicator (trade balance) measures the ratio between the volume of exports and imports of Australia. Growth in exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous Value (for December) AU $ 6.785 Billion. A decrease in the trade surplus may negatively affect the Australian dollar. Conversely, a growing trade surplus is a positive factor for the AUD. Forecast: A $ 6.500 billion.
The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. Index growth is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (for December) was +0.6%. If the data turns out to be weaker than the previous value, then the AUD may sharply decline in the short term, above the previous values, then the AUD is likely to strengthen. Forecast: +0.6% in January.
10:00 EUR Retail sales in the Eurozone
Retail sales is a major consumer spending indicator that shows the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for January: -1.1% and -1.3% (YoY) vs. +2.0% (+0.6% YoY) in December, -6.1% (-2.9% in annual terms) in November, +1.5% (+4.3% in annual terms) in October. The data suggests that retail sales have yet to hit pre-coronavirus levels after a sharp drop in March-April 2020, when tough quarantine measures were in place in Europe.
17:05 USD Speech by Fed Chairman Jerome Powell
Powell's comments could have an impact on both short-term and long-term USD trading if he touches the Fed's monetary policy. A more “hawkish” stance on the Fed's monetary policy is seen as positive and strengthening the US dollar, while a more cautious position is seen as negative for the USD.
If he makes unexpected statements, then the volatility in trading in the financial markets may increase. Financial market participants will carefully study his speech in order to catch signals from him regarding the further actions of the Fed.
Friday, March 05
13:30 USD Average hourly wage. The number of new jobs created outside the agricultural sector. Unemployment rate
The most important indicators of the state of the labor market in the United States in February. Forecast: +0.2% (against +0.2% in January, +0.8% in December, +0.3% in November) / +0.148 million (against +0.049 million in January, -0.140 million in December, +0.245 million in November, +0.638 million in October, +1.763 million in July and -20.687 million in April) / 6.4% (against 6.3% in January, 6.7% in December and November, 6, 9% in October, 13.3% in May and 14.7% in April), respectively.
In general, the figures are not yet encouraging, but they are quite understandable due to mass layoffs in American companies and the closure of offices and shops due to the coronavirus. At the same time, the data show a gradual improvement in the American labor market after its collapse in previous months at the beginning of the year. Prior to the coronavirus, the U.S. labor market remained strong, signaling the stability of the American economy and supporting the dollar.
It is often difficult to predict the market reaction to the publication of indicators, because many indicators for previous periods may be revised. Now it will be even more difficult to do this, because the economic situation in many other large economies is no better. In any case, when data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the entire financial market. Probably the most cautious investors will choose to stay out of the market during this time frame.