Macro observations

This week will be all about speeches. Already on Monday, we’ve seen hawkish commentary from Deputy Bank of England Governor Ramsden and Labour leader Corbyn advocating a soft Brexit lift Sterling higher. However, the best, and most important, are yet to come.

On Tuesday, new Federal Reserve Chair Jay Powell will give his first public appearance in office as he delivers the bi-annual monetary policy testimony to Congress, first to members of the House of Representatives (Tuesday; 3pm) followed by members of the Senate (Thursday; 3pm).

Dollar watchers will be looking for any clues to the number of rate hikes the Fed will make in 2018. Currently, the central bank is forecasting three hikes, however the market is pricing in four. A definitive answer from Powell could see a knee-jerk reaction from the global reserve currency.

Also on Tuesday, the European Commission’s chief Brexit negotiator Michel Barnier will update European ministers on the progression of negotiations between the EU and the UK, preparing for March’s European Council meeting at which the UK hopes to finalise a transition agreement.

On Friday, UK Prime Minister Theresa May will deliver the final of a series of speeches from the UK Government on its ‘Road to Brexit’, following on from British Cabinet Office minister Lidington on Monday and International Trade Secretary Liam Fox on Tuesday.

While Lidington warns Brexit should not be used to break up the UK – a dig at the Scottish National Party – and Dr. Fox will outline his views on what post-Brexit trade should look like, the PM will round things off with her personal proposals for the UK’s future relationship with the EU. The third crucial Brexit speech delivered by May, following her Lancaster House speech in January 2017 and her Florence speech in September 2017, she faces potential rebellions from both pro-EU and hard Brexiteers over her position. Which, if any, will she pander to on Friday?

As if that wasn’t enough, Bank of England Governor Carney will also be speaking on Friday, opening the inaugural Scottish Economics Conference. Following his deputy’s hawkish commentary over the weekend, will Carney also call for rates to be hiked ‘sooner, rather than later?’

Finally, over the weekend, the Italian election could have a significant impact on the Euro, as a too-close-to-call race finally reaches a climax. A victory for the centre-right coalition could see calls for an EU referendum similar to the UK’s in 2016, and may put the Euro under pressure. A victory for the centre-left, however, would likely calm nerves in Brussels.

While the speeches will steal the headlines, there is some room for data to also influence proceedings, especially for the US dollar.

US Trade Data (Tuesday; 1:30pm) will provide the latest insight into whether protectionism is taking hold in the world’s largest economy, while US GDP (Wednesday; 1:30pm) is expected to show economic growth was slightly slower in Q4 than first thought, expected at 2.5% rather than the first estimate of 2.6%. US Personal Income and Spending (Thursday; 1:30pm) could then offer a reason behind the expected slowing.

Other major macroeconomic data this week includes Eurozone Confidence Surveys (Tuesday; 10am), German CPI (Tues; 1pm), US Richmond Fed & Consumer Confidence (Tues; 3pm), UK GFK Consumer Confidence, Lloyds Business Barometer & BRC Shop Prices (Wednesday; 12am), Eurozone Consumer Price Inflation (Weds; 10am), Eurozone PMI Manufacturing (8-9am; Thursday), UK PMI Manufacturing, Consumer Borrowing & Mortgage Approvals (Thurs; 9:30am), US ISM Manufacturing (Thurs; 3pm), Eurozone Producer Price Inflation (10am) and US Uni of Michigan Consumer Confidence (3pm).

Key data this week (Sign up here to receive our daily live macro-calendar)

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Tuesday 27 February

Intl Economic Announcements
10:00    Confidence Surveys (Eurozone)
13:00    Consumer Price Inflation (Germany)
13:30    Durable Goods Orders (US)
14:00    House Prices (US)
15:00    Richmond Fed, Consumer Confidence (US)

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Wednesday 28 February

UK Economic Announcements
00:01    GFK Consumer Confidence, Lloyds Business Barometer, BRC Shop Prices

Intl Economic Announcements
01:00    PMI Manufacturing, Non-Manufacturing (China)
07:00    GFK Consumer Confidence (Germany)
07:45    GDP (France)
10:00    Consumer Price Inflation (Eurozone)
13:30    Personal Consumption, GDP (USA)
14:45    Chicago PMI (USA)
15:00    Pending Home Sales (USA)

—

Thursday 1 March

UK Economic Announcements
07:00    Nationwide House Prices*
09:30    PMI Manufacturing, Consumer Borrowing, Mortgage Approvals

Intl Economic Announcements
01:45    Caixin PMI Manufacturing (China)
8-9am   PMI Manufacturing (Eurozone)
13:30    Personal Income and Spending (US)
14:45    PMI Manufacturing (US)
15:00    ISM Manufacturing (US)

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Friday 2 March

UK Economic Announcements
09:30    PMI Construction

Intl Economic Announcements
10:00    Producer Price Inflation (Eurozone)
15:00    Uni of Michigan Consumer Confidence (US)

GBP/USD (‘Cable’)

Technicals

• Cable has further narrowed between $1.39-$1.41, now testing channel ceiling
• Will it successfully break out to fresh post-Brexit highs or fall back to lows of $1.345?
• Momentum continues to climb, now at 3-week highs
• Stochastics bullishly turned up from oversold

GBP/EUR

Technicals

• Sterling continues to trade in shallow rising channel between €1.12-€1.15.
• Will it break down or continue its bounce from the channel floor towards channel ceiling?
• Momentum at highest level since January
• RSI has bullishly crossed 50, supported by rising lows

EUR/USD

Technicals

• The Euro is ticking higher from is $1.225 lows after bearish flag completes
• Can the rally continue to February highs or will the rally lose steam?
• Momentum remains positive although off best levels
• Stochastics have turned back from oversold, although yet to cross 50

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