It will be a data-packed week for Japan, the Eurozone and the United States in the next seven days with Japanese industrial production, Eurozone flash inflation and US NFP report among the major releases. Also headlining will be the latest manufacturing surveys out of China and the Reserve Bank of Australia’s March policy meeting.
Japanese data will start the week on Monday with the release of industrial production and retail sales numbers for January. Industrial production is forecast to rebound by 3.3% in January from the previous month, after declining by 1.7% in December. On Tuesday, unemployment and household spending figures are published. Both sets of data have been in focus in recent months as the Bank of Japan has pinned its inflation outlook on wage growth and consumer spending picking up. The unemployment rate is expected to stay unchanged at 3.3% in January, while household spending is forecast to increase for a second consecutive month, by 0.3% month-on-month.
In China, the official February PMI readings as well as the Caixin PMIs are published. The official manufacturing and non-manufacturing PMIs from China’s National Bureau of Statistics are out on Tuesday. February’s manufacturing PMI is forecast to worsen slightly to 49.3. This would mark a seventh straight month of contraction. The Caixin manufacturing PMI is not expected to bring any relief either as it’s forecast to decline to 48.2 in February. Investors have been growing increasingly uneasy about China’s economy as the manufacturing sector remains in the doldrums. Markets have been disappointed with the lack of bolder policy actions by Chinese authorities, putting pressure on the yuan, which has been steadily depreciating against the dollar since mid-February.
A number of key indicators for the Eurozone are likely to be closely eyed by the European Central Bank next week ahead of the March 10 policy meeting. The flash CPI estimate for February is forecast to come in at 0% year-on-year versus 0.3% in January. Core CPI is also forecast to weaken slightly, declining from 1.0% to 0.9%. The ECB has grown increasingly concerned about declining inflation expectations and is likely to weigh its options carefully when it meets the following week. Euro area unemployment figures will follow on Tuesday where no change is expected at 10.4%. Also to watch for the Eurozone are the latest producer prices on Wednesday, and retail sales figures and final February PMIs on Thursday.
In the US, survey data such as the Chicago and ISM PMIs will be watched, particularly the ISM ones which have been below expectations in recent months. The ISM manufacturing PMI is due on Tuesday and is forecast to show a small improvement from 48.2 to 48.8 for February. The index slipped below 50 in November and has remained below that level since. On the other hand, the ISM non-manufacturing PMI has kept in expansion territory above 50 but has been on a downtrend since the second half of 2015. It is forecast to improve slightly to 54.0 in February when published on Thursday. The other major release out of the US is the all-important non-farm payrolls report on Friday. Non-farm payrolls are forecast to rise by 195k in February versus 151k the prior month. The unemployment rate is expected to stay at 4.9%, while average earnings are forecast to rise by 2.5% annually. The labor market is one of the few areas of the US economy that’s been a constant bright spot, making the dollar sensitive to any deviations of the NFP from the expected reading.
The coming week could also prove crucial for the Australian dollar as the Reserve Bank of Australia will hold its March policy meeting. Consensus estimates are for the cash rate to stay unchanged at 2.00% when the RBA announces its decision on Tuesday. The central bank has recently adopted a more neutral tone as domestic demand has proved resilient to the slowing Chinese economy and further rate cuts are likely be dependent on inflation weakening further. This has helped halt the aussie’s slide against the US dollar. Also to watch will be the fourth quarter GDP data. The Australian economy is forecast to expand by 0.5% quarter-on-quarter in the final 3 months of 2015, slower than the 0.9% rate seen in the third quarter.
Lastly, it will be a quieter week for the UK with only the PMI data to preoccupy sterling traders. The manufacturing PMI out on Tuesday is expected to ease to 52.2 in February, while the services PMI out on Thursday is forecast to slow to 55.1. Only the construction PMI is expected to show increased activity. It is forecast to edge up to 55.5 when released on Wednesday.
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