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While this week may be quiet in terms of UK data, there is still one headline event that will have all Sterling traders closely monitoring FX markets. Tuesday sees the UK Chancellor Hammond deliver his Spring statement after reshuffling the Government’s Budget calendar, but it’s not just the dates that have changed.
Tuesday’s release is likely to feature much less of the fiscal and budgetary obligations that previous statements have contained. Gone will be the financial tinkering – no new tax or public spending measures are set to be announced – however this address will likely include some allusions to the ongoing cost of Brexit as well as several consultations on tax measures.
Hammond is also likely to announce an upgrade to UK economic growth, reflecting more preferable global growth conditions and positive UK macro data, alongside a downward revision to public borrowing.
The tone that the Chancellor strikes will likely be reflected in Sterling, as well as the factoring in of the Brexit liabilities the UK faces. Having never fully disclosed the payments between the UK and EU, Tuesday’s estimate of the effect of the Brexit divorce payments on the public finances by the Office for Budget Responsibility will throw an extra juggling ball into the mix.
The Euro will suffer a similar dearth of macroeconomic data this week, however a couple of top tier events are likely to provide some direction for the single currency.
On Tuesday, against the backdrop of the UK Spring Statement, EU finance ministers will be meeting in Brussels for the latest Eurogroup get together. There will likely be preparations for next week’s crucial UK-EU summit in which both sides are expected to finalise a transitional agreement that will allow the UK to adopt EU laws despite having left the bloc. Any hardball EU rhetoric could see the Euro rally against its peer from across the English Channel.
On Wednesday, the 19th ‘ECB and its watchers’ conference will see a plethora of high level speeches, including an appearance from ECB President Mario Draghi. Colleagues Praet (Chief Economist) and Angeloni will discuss the impact of policy normalisation, while Constâncio will speak about financial stability.
Fresh from last week’s monetary policy meeting, in which the Governing Council removed some of the language promoting an ‘easing bias’ (a dovish policy), what these ECB members suggest is next for monetary policy will be key for the Euro.
The United States, fresh from the changing of clocks over the weekend (releases will be an hour earlier for the next fortnight), has the most complete macroeconomic calendar, however the overhang of last week’s Jobs Report will likely drive sentiment in the early part of the week.
Friday’s print was seen as a ‘Goldilocks’ situation – where inflationary pressures were not realised despite strong growth – boosting the US dollar. Tuesday’s CPI release will be an early test of whether this holds true.
While expectations are for the key inflation print to tick slightly higher in February, a stronger than expected reading could harm the US dollar as the Fed may be forced to raise interest rates faster than current expectations, hurting growth.
Other macroeconomic data of note this week includes German Consumer Inflation (Wednesday, 7am), Eurozone Industrial Production (Weds; 10am), Retail Sales & Producer Price Inflation (Weds; 12:30pm), US Empire Manuf., Import/Export Price Inflation, Philly Fed (Thursday, 12:30pm), US NAHB Housing Index (2pm), Eurozone final Consumer Price Inflation & Labour Costs (Friday; 10am), US Housing Starts & Building Permits, (Fri; 12:30pm), US Industrial & Manufacturing Production (Fri; 1:15pm) and US Uni of Michigan Consumer Confidence (Fri; 2pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
12:00 Spring Budget (after PMQs)
Intl Economic Announcements
10:00 NFIB Small Business Optimism (US)
12:30 Consumer Inflation, Wage growth (US)
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Intl Economic Announcements
02:00 Retail Sales, Industrial Production (China)
07:00 Consumer Inflation (Germany)
10:00 Industrial Production (Eurozone)
12:30 Retail Sales, Producer Price Inflation (US)
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Intl Economic Announcements
07:00 New Car Registrations (EU)
12:30 Empire Manuf., Import/Export Price Inflation, Philly Fed (US)
14:00 NAHB Housing (US)
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Intl Economic Announcements
10:00 Consumer Price Inflation, Labour Costs (Eurozone)
12:30 Housing Starts, Building Permits, (US)
13:15 Industrial & Manufacturing Production (US)
14:00 Uni of Michigan Consumer Confidence (US)
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