Preview of the week ahead:
- The European Central Bank is expected to strike a dovish tone this week as EU and US sanctions against Russia stoked a liquidity crunch.
- US inflation rates are expected to hit new cyclical highs, but that won’t change much of the Fed’s calculation for a rate hike this month.
- The Canadian jobs report should be quite strong, but the Canadian dollar may not benefit significantly either way.
For the entire week ahead, please visit the DailyFX Economic Calendar.
03/09 WEDNESDAY | 01:30 & 03/10 THURSDAY | 08:00 GMT | CNY INFLATION RATE (CPI) (FEB); LOANS IN NEW YUAN CNY (FEBRUARY)
As China grapples with another wave of COVID-19 infections – moving ever closer to abandoning its zero COVID strategy – evidence has been mounting that the economy has lost steam in the start of 2022. China’s CPI inflation rate for February is expected at +0.9% y/y, same as in January. But Chinese authorities appear to be trying to breathe new life into the economy – perhaps to offset lingering worries in the property sector – as evidenced by forecasts that new yuan lending will remain near record highs. . All told, the two data releases are unlikely to drag down the Chinese yuan, which has been incredibly resilient so far this year.
03/10 THURSDAY | 12:45 p.m., 1:30 p.m. | European Central Bank rate decision in EUR
Russia’s invasion of Ukraine is causing liquidity strains in the global financial sector, with European banks at the center of the storm. There is a non-zero chance that EU and US sanctions against the Central Bank of Russia will cause a liquidity crisis for European banks that persists for the foreseeable future.In turn, this may provide the excuse ECB officials need to justify maintaining their asset purchase program until 3Q’22, and lower interest rates for longer. We will hear this week from the ECB on its March rate decision, which should shed light on its outlook, alongside the release of its updated Staff Economic Projections (SEP).
03/10 THURSDAY | 1:30 p.m. GMT | Inflation rate in USD (CPI) (FEB)
We iinflationary pressures are poised to hit new multi-decade highs this week as the impacts of omicron’s variants of COVID-19 are still being felt in the global supply chain. But the worst may be yet to come, as the Russian invasion of Ukraine has triggered a surge in agricultural, energy and base metal commodities. According to a Bloomberg News investigation, the stock February The US inflation rate (CPI) is expected in at +0.8% month/month from +0.5% m/m and at +7.9% y/y from +7.5%y/y, with core inflation (excluding energy and food) expected at +0.5% m/m vs. +0.6% m/m and at +6.4% a/a of +6%. The data will likely help keep US rate hike expectations firmwho are strongly in favor of a 25 basis point rate hike by the Federal Reserve this month.
03/11 FRIDAY | 07:00 GMT | Gross domestic product in pounds sterling (JAN)
The UK economy appears to have gained momentum in early 2022, partly due to the statistical base effect resulting from the slowdown in early 2021 (when COVID-19 infections were raging). For January, tYear-over-year reading is scheduled for +9.3% of +6%, even if the growth rate over three months should go from +1% to +0.8%. Nonetheless, these are pretty strong readings that will likely keep the odds of a BOE rate hike high in the near term.
03/11 FRIDAY | 1:30 p.m. GMT | Change in employment in CAD and unemployment rate (FEB)
Despite nationwide protests against COVID-19 mandates, the Canadian economy appears to have benefited from lower COVID-19 infection rates and higher energy prices in the month last. According to a Bloomberg News survey, the Canadian economy added+160K jobs in February after losing-200.1K jobs in January. The Canadian unemployment rate should drop sharply from 6.5% to 6.2%. Unfortunately for the Canadian dollar, gains in energy prices do not necessarily stimulate appetite for the currency as broader “risk aversion” moves envelop the market thanks to the Russian invasion of Ukraine. ; more limited price action is expected.
— Written by Christopher Vecchio, CFA, Senior Strategist