Let us see what we expect from the week, which starts with the Eurogroup meeting. After last week’s great employment numbers and ahead of next week’s FOMC meeting, US inflation numbers and the ECB meeting will be at the center of the stage in the week ahead. UK labor data and Australian and US Housing numbers also will be other important data to watch.
Eurogroup meeting – Monday
The Eurogroup will focus on macroeconomic and fiscal developments in the euro area, and the meeting is expected to end with a statement on fiscal policy guidance for 2023 and 2024. We expect to see a minimal impact on markets. Eurozone economic data and expectations are worrying, so what leaders decide and plan will be essential to watch.
UK Labor market data – Tuesday
The unemployment rate is expected to increase to 3.8% after three months, unchanged at 3.7%. On the other hand, the Average Earnings Index predicts to ease for the second month in a row. The January UK earnings Index, including bonuses, is expected to grow by 5.7%. These desired data mean the economy is slowing down, and income ease will help inflation decrease. Therefore Bank of England will have enough reason to slow down its rate hike policy.
US Inflation – Tuesday, Wednesday
Headline inflation raised 0.5% in January, the most significant monthly move since October. On the other hand, the Average Hourly Earnings eased in January and February, and unemployment rose to 3.6% in February after falling to 3.4% in January. These numbers say this strong labor market may keep inflation stubbornly above the Fed’s 2% target for longer. We expect another monthly increase of 0.4% in the overall CPI in February, which would decrease the annual rate to 6.0%. The core CPI also intends to increase by 0.4%. On the other hand, the Producer price index, due to publish on Wednesday, is expected to grow at a slower pace of 0.3%. Nevertheless, these data will still support Fed speakers’ more hawkish tone.
US Retail Sales – Wednesday
After four months of weakness, January retail sales raised by 3%, and the market expects a -0.3% decrease for February. Traditionally January retail sales are strong, but if this growth repeats in February as well, then it means demand also is still strong, so Fed will have a bit harder job coll the inflation. Higher retail sales mean Fed must use more tools to slow demands and economic growth.
China Industrial Production & Labor market – Wednesday
With reopenings in China, we expect growth in almost every sector, including employment, manufacturing, and industrial sectors. We hope to see a 2.6% growth in industrial production in February and unemployment of less than 5.5% seen in January. This upward data is expected to affect oil demand and price positively.
European Central Bank – Thursday
Due to the late start, European Central Bank is now the most hawkish central bank in the world. We expect another 50 bps rate hike in this week’s meeting, as ECB policymakers signaled in recent weeks, to bring inflation back down to target ranges. ECB target Deposit Rate is the main question. Will policymakers accept the risk of recession and go towards 4.5% to slow inflation, or will recession fear stop them at 3.5%? To find the answer to this question, we have to follow the forward guidance provided by the ECB statement and ECB President Lagarde’sw press conference immediately after the monetary policy decision.
US Industrial Production – Friday
Following higher retail sales and orders in January and February, Friday’s industrial production report may show another modest rise. On the other hand, the global economic downturn does not seem as malignant as expected. However, continuing the growing trend of economic data for the last month or two is still under question. However, these desired data confirm the healthy condition of the US economy, support the US dollar and increase the pressure on Stock markets.