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After the twists and turns of last week’s central bank updates, a relatively light week for macroeconomic data thrusts the spotlight onto speakers on both sides of the Atlantic to provide foreign exchange markets with direction, while the build up to the official triggering of Article 50 begins in earnest.
The single most important address will come from Federal Reserve Chair Janet Yellen on Thursday after the Fed’s FOMC did not increase the median forecast for 2017 rate hikes from 3 to 4 as many investors had expected. This is the cause of the sharp sell-off of the US dollar after the meeting, rather than the rate hike in itself. Questions likely to be put to Yellen will likely include her forecasts for rate hikes through the remainder of 2017 and whether we are likely to see this increase. Having already heard from the lone dissenter from the FOMC meeting once this week already in which he claimed the Fed ‘should not fix what is not spoken’, Neel Kashkari’s appearance at the same conference on Thursday will provide an antithetical view, while the Fed schedule for this week includes a further seven members giving their thoughts throughout the week. Expect this deluge of US policymakers’ speeches to provide dollar traders with plenty of food for thought.
As mentioned above, the official date for the triggering of Article 50, and subsequently the beginning of the two-year negotiating time table for the UK’s exit from the EU, has been announced. A spokesman for UK Prime Minister Theresa May confirmed that she will formally notify her European counterparts on 29 March. Until then, however, she will embark on a UK tour to the devolved regions to try and allay concerns that Brexit will have a negative impact on the areas. While we’re not expecting May to reveal her full hand, be aware she may choose to reveal some information as to her government’s plans before Article 50’s formal triggering. Could a potential Scottish Referendum date be revealed during her tour to Scotland?
However, the primary focus for Sterling traders in will be the reaction of the Bank of England to inflation reaching 2% in February. The further than expected readings of CPI, Core CPI and RPI has seen Sterling rally significantly against its US and European counterparts. This comes after Kristin Forbes dissented against the rest of the BoE’s Monetary Policy Committee last week, voting in favour of raising rates whilst the other eight members all decided to support leaving rates unchanged, later stating that she did so due to the rapidly rising amount of inflation in the UK economy.
Now, with the Core CPI inflation reading, the BoE’s preferred metric, confirmed at the Bank’s target of 2%, it is likely a much greater debate will be raised over the coming weeks. Having previously stated that he would be willing to tolerate an inflation overshoot, Governor Mark Carney may have to quantify that tolerance, perhaps resulting in a more hawkish rhetoric to emerge from within the central bank. Could the path towards monetary policy normalisation, and the resultant strengthening of Sterling, be closer than previously thought?
Finally, drivers for the Euro are few and far between this week following last week’s Dutch elections. With a victory for the centre-right dashing hopes of a continuation of the rising European populist movement after Brexit and Trump, euro-watchers will turn their focus once again to the French presidential campaign for clues as to the fate of Europe.
The latest polls suggest Marine Le Pen gaining ground in second round voting against her more centrist rivals, despite the defeat of her contemporary Geert Wilders in the Netherlands. With that said, however, she failed to stamp her authority on the first televised debate of the campaign on Monday evening, with polls handing a victory to the centrist Macron. However, with the polls being notoriously unsuccessful in 2016, might markets choose to ignore the debate results in favour of the latest controversies arising from across the channel?
Key data this week (Sign up here to get our daily live macro-calendar)
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UK Economic Announcements
00:01 Rightmove House Prices
Intl Economic Announcement
07:00 PPI (DE)
12:30 Chicago Fed (US)
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UK Economic Announcements
09:30 Inflation figures (CPI, RPI, PPI, HPI)
11:00 CBI Trends
Intl Economic Announcements
23:50 BoJ March Meeting Minutes (JP)
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Intl Economic Announcements
11:00 Mortgage Applications (US)
13:00 House Price Index (US)
14:00 Existing Home Sales (US)
14:30 Oil Inventories (US)
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UK Economic Announcements
09:30 Retail Sales
11:00 CBI Reported Sales
Intl Economic Announcements
07:00 GfK Consumer Confidence (DE)
12:00 Fed Chair Janet Yellen Speaks (US)
12:30 Jobless Claims (US)
14:00 New Home Sales (US)
15:00 Consumer Confidence (EZ)
15:00 Kansas City Fed (US)
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UK Economic Announcements
09:30 Mortgage Approvals
Intl Economic Announcements
00:30 PMI Manufacturing (JP)
07:45 GDP (FR)
8-9am Manufacturing & Services PMI (Various Europe)
12:30 Durable Goods Orders (US)
13:45 Manufacturing PMI (US)
17:00 Baker Hughes Rig Count (US)
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